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Hedge Funds Have Never Been This Bullish On Teladoc Health, Inc. (TDOC)

In this article you are going to find out whether hedge funds think Teladoc Health, Inc. (NYSE:TDOC) is a good investment right now. We like to check what the smart money thinks first before doing extensive research on a given stock. Although there have been several high profile failed hedge fund picks, the consensus picks among hedge fund investors have historically outperformed the market after adjusting for known risk attributes. It’s not surprising given that hedge funds have access to better information and more resources to predict the winners in the stock market.

Is Teladoc Health, Inc. (NYSE:TDOC) worth your attention right now? Prominent investors are in an optimistic mood. The number of bullish hedge fund positions rose by 13 in recent months. Our calculations also showed that TDOC isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings and see the video for a quick look at the top 5 stocks). TDOC was in 36 hedge funds’ portfolios at the end of the first quarter of 2020. There were 23 hedge funds in our database with TDOC positions at the end of the previous quarter.

Video: Watch our video about the top 5 most popular hedge fund stocks.

To the average investor there are tons of metrics stock traders use to value their stock investments. A couple of the most innovative metrics are hedge fund and insider trading signals. Our researchers have shown that, historically, those who follow the top picks of the top investment managers can outpace the S&P 500 by a very impressive margin (see the details here).

Bruce Kovner, Caxton Associates LP

Bruce Kovner of Caxton Associates LP

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, 2020’s unprecedented market conditions provide us with the highest number of trading opportunities in a decade. So we are checking out trades like this one. We interview hedge fund managers and ask them about their best ideas. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. With all of this in mind let’s take a look at the latest hedge fund action regarding Teladoc Health, Inc. (NYSE:TDOC).

How are hedge funds trading Teladoc Health, Inc. (NYSE:TDOC)?

At the end of the first quarter, a total of 36 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 57% from the fourth quarter of 2019. The graph below displays the number of hedge funds with bullish position in TDOC over the last 18 quarters. So, let’s see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Among these funds, Zevenbergen Capital Investments held the most valuable stake in Teladoc Health, Inc. (NYSE:TDOC), which was worth $179 million at the end of the third quarter. On the second spot was D E Shaw which amassed $68.4 million worth of shares. Citadel Investment Group, Arrowstreet Capital, and Citadel 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 Zevenbergen Capital Investments allocated the biggest weight to Teladoc Health, Inc. (NYSE:TDOC), around 6.74% of its 13F portfolio. Sectoral Asset Management is also relatively very bullish on the stock, earmarking 5.23 percent of its 13F equity portfolio to TDOC.

With a general bullishness amongst the heavyweights, some big names were leading the bulls’ herd. D E Shaw, managed by D. E. Shaw, initiated the biggest position in Teladoc Health, Inc. (NYSE:TDOC). D E Shaw had $68.4 million invested in the company at the end of the quarter. Mark Coe’s Intrinsic Edge Capital also made a $9.5 million investment in the stock during the quarter. The other funds with new positions in the stock are Michael Rockefeller and KarláKroeker’s Woodline Partners, Bruce Kovner’s Caxton Associates LP, and Pasco Alfaro / Richard Tumure’s Miura Global Management.

Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as Teladoc Health, Inc. (NYSE:TDOC) but similarly valued. These stocks are West Pharmaceutical Services Inc. (NYSE:WST), Yandex NV (NASDAQ:YNDX), NortonLifeLock Inc. (NASDAQ:NLOK), and Expeditors International of Washington, Inc. (NASDAQ:EXPD). This group of stocks’ market caps are closest to TDOC’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
WST 27 346802 -2
YNDX 35 770433 -3
NLOK 42 1352392 -4
EXPD 31 346287 4
Average 33.75 703979 -1.25

View table here if you experience formatting issues.

As you can see these stocks had an average of 33.75 hedge funds with bullish positions and the average amount invested in these stocks was $704 million. That figure was $533 million in TDOC’s case. NortonLifeLock Inc. (NASDAQ:NLOK) is the most popular stock in this table. On the other hand West Pharmaceutical Services Inc. (NYSE:WST) is the least popular one with only 27 bullish hedge fund positions. Teladoc Health, Inc. (NYSE:TDOC) is not the most popular stock in this group but hedge fund interest is still above average. This is a slightly positive signal but we’d rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 8.3% in 2020 through the end of May but beat the market by 13.2 percentage points. Unfortunately TDOC wasn’t nearly as popular as these 10 stocks and hedge funds that were betting on TDOC were disappointed as the stock returned 12.3% during the same time period and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 10 most popular stocks among hedge funds as many of these stocks already outperformed the market so far this year.

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