Is Teladoc Health, Inc. (NYSE:TDOC) a good bet right now? We like to analyze hedge fund sentiment before doing days of in-depth research. We do so because hedge funds and other elite investors have numerous Ivy League graduates, expert network advisers, and supply chain tipsters working or consulting for them. There is not a shortage of news stories covering failed hedge fund investments and it is a fact that hedge funds’ picks don’t beat the market 100% of the time, but their consensus picks have historically done very well and have outperformed the market after adjusting for risk.
Teladoc Health, Inc. (NYSE:TDOC) shares haven’t seen a lot of action during the third quarter. Overall, hedge fund sentiment was unchanged. The stock was in 19 hedge funds’ portfolios at the end of the fourth quarter of 2018. The level and the change in hedge fund popularity aren’t the only variables you need to analyze to decipher hedge funds’ perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That’s why at the end of this article we will examine companies such as CVR Energy, Inc. (NYSE:CVI), Helen of Troy Limited (NASDAQ:HELE), and Mattel, Inc. (NASDAQ:MAT) to gather more data points.
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 has shown that hedge funds’ small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the market by 32 percentage points since May 2014 through March 12, 2019 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter.
Let’s take a look at the key hedge fund action encompassing Teladoc Health, Inc. (NYSE:TDOC).
Hedge fund activity in Teladoc Health, Inc. (NYSE:TDOC)
At Q4’s end, a total of 19 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 0% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in TDOC over the last 14 quarters. With hedgies’ positions undergoing their usual ebb and flow, there exists a select group of key hedge fund managers who were increasing their stakes considerably (or already accumulated large positions).
Of the funds tracked by Insider Monkey, Millennium Management, managed by Israel Englander, holds the biggest position in Teladoc Health, Inc. (NYSE:TDOC). Millennium Management has a $45 million position in the stock, comprising 0.1% of its 13F portfolio. On Millennium Management’s heels is Jerome Pfund and Michael Sjostrom of Sectoral Asset Management, with a $31.3 million position; the fund has 4.3% of its 13F portfolio invested in the stock. Some other members of the smart money that are bullish comprise Jeremy Green’s Redmile Group, Mario Gabelli’s GAMCO Investors and Richard Driehaus’s Driehaus Capital.
Since Teladoc Health, Inc. (NYSE:TDOC) has experienced declining sentiment from the smart money, it’s safe to say that there is a sect of fund managers that decided to sell off their entire stakes by the end of the third quarter. It’s worth mentioning that Principal Global Investors’s Columbus Circle Investors sold off the largest investment of the “upper crust” of funds followed by Insider Monkey, totaling an estimated $36.5 million in stock. Michael Hintze’s fund, CQS Cayman LP, also cut its stock, about $24 million worth. These transactions are interesting, as total hedge fund interest stayed the same (this is a bearish signal in our experience).
Let’s check out 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 CVR Energy, Inc. (NYSE:CVI), Helen of Troy Limited (NASDAQ:HELE), Mattel, Inc. (NASDAQ:MAT), and Emcor Group Inc (NYSE:EME). This group of stocks’ market values are closest to TDOC’s market value.
|Ticker||No of HFs with positions||Total Value of HF Positions (x1000)||Change in HF Position|
View table here if you experience formatting issues.
As you can see these stocks had an average of 18 hedge funds with bullish positions and the average amount invested in these stocks was $863 million. That figure was $139 million in TDOC’s case. CVR Energy, Inc. (NYSE:CVI) is the most popular stock in this table. On the other hand Mattel, Inc. (NASDAQ:MAT) is the least popular one with only 15 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 15 most popular stocks) among hedge funds returned 24.2% through April 22nd and outperformed the S&P 500 ETF (SPY) by more than 7 percentage points. Unfortunately TDOC wasn’t nearly as popular as these 15 stock and hedge funds that were betting on TDOC were disappointed as the stock returned 10.9% and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 15 most popular stocks) among hedge funds as 13 of these stocks already outperformed the market this year.
Disclosure: None. This article was originally published at Insider Monkey.