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

The latest 13F reporting period has come and gone, and Insider Monkey have plowed through 823 13F filings that hedge funds and well-known value investors are required to file by the SEC. The 13F filings show the funds’ and investors’ portfolio positions as of June 30th, when the S&P 500 Index was trading around the 3100 level. Since the end of March, investors decided to bet on the economic recovery and a stock market rebound. S&P 500 Index returned more than 50% since its bottom. In this article you are going to find out whether hedge funds thought Teladoc Health, Inc (NYSE:TDOC) was a good investment heading into the third quarter and how the stock traded in comparison to the top hedge fund picks.

Teladoc Health, Inc (NYSE:TDOC) was in 44 hedge funds’ portfolios at the end of the second quarter of 2020. The all time high for this statistics is 36. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. TDOC investors should pay attention to an increase in enthusiasm from smart money recently. There were 36 hedge funds in our database with TDOC positions at the end of the first quarter. Our calculations also showed that TDOC isn’t among the 30 most popular stocks among hedge funds (click for Q2 rankings and see the video for a quick look at the top 5 stocks).

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

Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. Our research was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 56 percentage points since March 2017 (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 34% through August 17th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

Ken Griffin

Ken Griffin of Citadel Investment Group

At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, legal marijuana is one of the fastest growing industries right now, so we are checking out stock pitches like “the Starbucks of cannabis” to identify the next tenbagger. Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost precious metals prices. So, we are checking out this junior gold mining stock. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We go through lists like the 10 most profitable companies in the world to pick the best large-cap stocks to buy. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. With all of this in mind we’re going to take a look at the latest hedge fund action regarding Teladoc Health, Inc (NYSE:TDOC).

What have hedge funds been doing with Teladoc Health, Inc (NYSE:TDOC)?

At the end of the second quarter, a total of 44 of the hedge funds tracked by Insider Monkey were long this stock, a change of 22% from one quarter earlier. By comparison, 18 hedge funds held shares or bullish call options in TDOC a year ago. So, let’s find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Among these funds, Arrowstreet Capital held the most valuable stake in Teladoc Health, Inc (NYSE:TDOC), which was worth $199.3 million at the end of the third quarter. On the second spot was Zevenbergen Capital Investments which amassed $172.4 million worth of shares. Millennium Management, Citadel Investment Group, and Paloma Partners 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 4.11% of its 13F portfolio. Ayrshire Capital Management is also relatively very bullish on the stock, dishing out 2.47 percent of its 13F equity portfolio to TDOC.

Consequently, key money managers have jumped into Teladoc Health, Inc (NYSE:TDOC) headfirst. ZWEIG DIMENNA PARTNERS, managed by Joe DiMenna, assembled the largest position in Teladoc Health, Inc (NYSE:TDOC). ZWEIG DIMENNA PARTNERS had $21.8 million invested in the company at the end of the quarter. Peter Muller’s PDT Partners also initiated a $6.5 million position during the quarter. The other funds with brand new TDOC positions are Jinghua Yan’s TwinBeech Capital, Robert B. Gillam’s McKinley Capital Management, and Benjamin A. Smith’s Laurion Capital Management.

Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as Teladoc Health, Inc (NYSE:TDOC) but similarly valued. We will take a look at Healthpeak Properties, Inc. (NYSE:PEAK), Tiffany & Co. (NYSE:TIF), Hologic, Inc. (NASDAQ:HOLX), BeiGene, Ltd. (NASDAQ:BGNE), CarMax Inc (NYSE:KMX), Broadridge Financial Solutions, Inc. (NYSE:BR), and SS&C Technologies Holdings, Inc. (NASDAQ:SSNC). This group of stocks’ market valuations are closest to TDOC’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
PEAK 23 372112 -3
TIF 64 2401546 -5
HOLX 46 1546938 5
BGNE 13 3356980 2
KMX 46 1420392 9
BR 24 193920 -5
SSNC 65 2274258 8
Average 40.1 1652307 1.6

View table here if you experience formatting issues.

As you can see these stocks had an average of 40.1 hedge funds with bullish positions and the average amount invested in these stocks was $1652 million. That figure was $812 million in TDOC’s case. SS&C Technologies Holdings, Inc. (NASDAQ:SSNC) is the most popular stock in this table. On the other hand BeiGene, Ltd. (NASDAQ:BGNE) is the least popular one with only 13 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. Our overall hedge fund sentiment score for TDOC is 69.8. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. 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 33% in 2020 through the end of August and beat the market by 23.2 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 13% 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.