Hedge Funds Are Crazy About Livongo Health, Inc. (LVGO)

We are still in an overall bull market and many stocks that smart money investors were piling into surged through the end of November. Among them, Facebook and Microsoft ranked among the top 3 picks and these stocks gained 54% and 51% respectively. Hedge funds’ top 3 stock picks returned 41.7% this year and beat the S&P 500 ETFs by 14 percentage points. Investing in index funds guarantees you average returns, not superior returns. We are looking to generate superior returns for our readers. That’s why we believe it isn’t a waste of time to check out hedge fund sentiment before you invest in a stock like Livongo Health, Inc. (NASDAQ:LVGO).

Livongo Health, Inc. (NASDAQ:LVGO) was in 15 hedge funds’ portfolios at the end of September. LVGO investors should pay attention to an increase in hedge fund sentiment recently. There were 0 hedge funds in our database with LVGO holdings at the end of the previous quarter. Our calculations also showed that LVGO isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings).
5 Most Popular Stocks Among Hedge Funds
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.

Why do we pay any attention at all to hedge fund sentiment? Our research has shown that hedge funds’ large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were able to identify in advance a select group of hedge fund holdings that outperformed the Russell 2000 ETFs by 40 percentage points since May 2014 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 27.8% through November 21, 2019. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

Daniel Sundheim D1 Capital

Daniel Sundheim of D1 Capital Partners

We leave no stone unturned when looking for the next great investment idea. For example Discover is offering this insane cashback card, so we look into shorting the stock. One of the most bullish analysts in America just put his money where his mouth is. He says, “I’m investing more today than I did back in early 2009.” So we check out his pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We even check out this option genius’ weekly trade ideas. This December, we recommended Adams Energy as a one-way bet based on an under-the-radar fund manager’s investor letter and the stock already gained 20 percent. Now we’re going to review the fresh hedge fund action surrounding Livongo Health, Inc. (NASDAQ:LVGO).

What have hedge funds been doing with Livongo Health, Inc. (NASDAQ:LVGO)?

At Q3’s end, a total of 15 of the hedge funds tracked by Insider Monkey were long this stock, a change of 15 from the previous quarter. The graph below displays the number of hedge funds with bullish position in LVGO over the last 17 quarters. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Is LVGO A Good Stock To Buy?

More specifically, D1 Capital Partners was the largest shareholder of Livongo Health, Inc. (NASDAQ:LVGO), with a stake worth $13.6 million reported as of the end of September. Trailing D1 Capital Partners was Nishkama Capital, which amassed a stake valued at $8.1 million. Millennium Management, Tiger Global Management, and Alyeska Investment Group were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position Nishkama Capital allocated the biggest weight to Livongo Health, Inc. (NASDAQ:LVGO), around 8.68% of its 13F portfolio. Inherent Group is also relatively very bullish on the stock, earmarking 2.9 percent of its 13F equity portfolio to LVGO.

With a general bullishness amongst the heavyweights, some big names have been driving this bullishness. D1 Capital Partners, managed by Daniel Sundheim, created the most outsized position in Livongo Health, Inc. (NASDAQ:LVGO). D1 Capital Partners had $13.6 million invested in the company at the end of the quarter. Ravee Mehta’s Nishkama Capital also initiated a $8.1 million position during the quarter. The other funds with brand new LVGO positions are Israel Englander’s Millennium Management, Chase Coleman’s Tiger Global Management, and Anand Parekh’s Alyeska Investment Group.

Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as Livongo Health, Inc. (NASDAQ:LVGO) but similarly valued. We will take a look at Heartland Financial USA Inc (NASDAQ:HTLF), NIO Inc. (NYSE:NIO), Bloomin’ Brands Inc (NASDAQ:BLMN), and Provident Financial Services, Inc. (NYSE:PFS). This group of stocks’ market caps resemble LVGO’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
HTLF 9 24829 1
NIO 13 31011 -1
BLMN 18 250574 -4
PFS 11 55738 0
Average 12.75 90538 -1

View table here if you experience formatting issues.

As you can see these stocks had an average of 12.75 hedge funds with bullish positions and the average amount invested in these stocks was $91 million. That figure was $49 million in LVGO’s case. Bloomin’ Brands Inc (NASDAQ:BLMN) is the most popular stock in this table. On the other hand Heartland Financial USA Inc (NASDAQ:HTLF) is the least popular one with only 9 bullish hedge fund positions. Livongo Health, Inc. (NASDAQ:LVGO) is not the most popular stock in this group but hedge fund interest is still above average. Our calculations showed that top 20 most popular stocks among hedge funds returned 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. Hedge funds were also right about betting on LVGO as the stock returned 63.8% during the fourth quarter (through the end of November) and outperformed the market. Hedge funds were rewarded for their relative bullishness.

Disclosure: None. This article was originally published at Insider Monkey.