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Hedge Funds Never Been Less Bullish On Tivity Health, Inc. (TVTY)

At the end of February we announced the arrival of the first US recession since 2009 and we predicted that the market will decline by at least 20% in (see why hell is coming). In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. In this article, we will take a closer look at hedge fund sentiment towards Tivity Health, Inc. (NASDAQ:TVTY) at the end of the first quarter and determine whether the smart money was really smart about this stock.

Is Tivity Health, Inc. (NASDAQ:TVTY) going to take off soon? Money managers were getting less optimistic. The number of long hedge fund bets were cut by 5 lately. Our calculations also showed that TVTY 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). TVTY was in 13 hedge funds’ portfolios at the end of March. There were 18 hedge funds in our database with TVTY holdings at the end of the previous quarter.

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 58 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 36% through May 18th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

Bill Miller

Bill Miller of Miller Value Partners

At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, we take a look at lists like the 13 largest cobalt producing countries to identify emerging trends that are likely to lead to 1000% gains in the coming years. We interview hedge fund managers and ask them about their best ideas. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. For example we are checking out stocks recommended/scorned by legendary Bill Miller. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 in February after realizing the coronavirus pandemic’s significance before most investors. Now let’s check out the fresh hedge fund action encompassing Tivity Health, Inc. (NASDAQ:TVTY).

How have hedgies been trading Tivity Health, Inc. (NASDAQ:TVTY)?

At the end of the first quarter, a total of 13 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -28% from the previous quarter. By comparison, 20 hedge funds held shares or bullish call options in TVTY a year ago. So, let’s see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

When looking at the institutional investors followed by Insider Monkey, Douglas Braunstein and James Woolery’s Hudson Executive Capital has the biggest position in Tivity Health, Inc. (NASDAQ:TVTY), worth close to $55.1 million, corresponding to 7% of its total 13F portfolio. Sitting at the No. 2 spot is HG Vora Capital Management, led by Parag Vora, holding a $29.9 million position; 2.9% of its 13F portfolio is allocated to the stock. Remaining peers that hold long positions include Bill Miller’s Miller Value Partners, Malcolm Levine’s Dendur Capital and Israel Englander’s Millennium Management. In terms of the portfolio weights assigned to each position Dendur Capital allocated the biggest weight to Tivity Health, Inc. (NASDAQ:TVTY), around 7.14% of its 13F portfolio. Hudson Executive Capital is also relatively very bullish on the stock, setting aside 6.97 percent of its 13F equity portfolio to TVTY.

Due to the fact that Tivity Health, Inc. (NASDAQ:TVTY) has faced declining sentiment from the entirety of the hedge funds we track, we can see that there is a sect of fund managers who sold off their full holdings last quarter. Intriguingly, Paul Marshall and Ian Wace’s Marshall Wace LLP said goodbye to the largest position of the 750 funds monitored by Insider Monkey, worth an estimated $8.6 million in stock. Renaissance Technologies, also said goodbye to its stock, about $3.6 million worth. These bearish behaviors are important to note, as aggregate hedge fund interest dropped by 5 funds last quarter.

Let’s now take a look at hedge fund activity in other stocks similar to Tivity Health, Inc. (NASDAQ:TVTY). We will take a look at Intelligent Systems Corporation (NYSE:INS), Flexion Therapeutics Inc (NASDAQ:FLXN), Franklin Financial Network Inc (NYSE:FSB), and Liberty Oilfield Services Inc. (NYSE:LBRT). All of these stocks’ market caps match TVTY’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
INS 9 62514 0
FLXN 14 55390 -1
FSB 4 7832 0
LBRT 12 11323 -4
Average 9.75 34265 -1.25

View table here if you experience formatting issues.

As you can see these stocks had an average of 9.75 hedge funds with bullish positions and the average amount invested in these stocks was $34 million. That figure was $135 million in TVTY’s case. Flexion Therapeutics Inc (NASDAQ:FLXN) is the most popular stock in this table. On the other hand Franklin Financial Network Inc (NYSE:FSB) is the least popular one with only 4 bullish hedge fund positions. Tivity Health, Inc. (NASDAQ:TVTY) is not the most popular stock in this group but hedge fund interest is still above average. 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 13.3% in 2020 through June 25th but still beat the market by 16.8 percentage points. Hedge funds were also right about betting on TVTY as the stock returned 75.7% in Q2 (through June 25th) and outperformed the market. Hedge funds were rewarded for their relative bullishness.

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