Although the masses and most of the financial media blame hedge funds for their exorbitant fee structure and disappointing performance, these investors have proved to have great stock picking abilities over the years (that’s why their assets under management continue to swell). We believe hedge fund sentiment should serve as a crucial tool of an individual investor’s stock selection process, as it may offer great insights of how the brightest minds of the finance industry feel about specific stocks. After all, these people have access to smartest analysts and expensive data/information sources that individual investors can’t match. So should one consider investing in Teladoc Health, Inc (NYSE:TDOC)? The smart money sentiment can provide an answer to this question.
Is TDOC stock a buy or sell? The best stock pickers were getting more optimistic. The number of bullish hedge fund bets inched up by 3 lately. Teladoc Health, Inc (NYSE:TDOC) was in 50 hedge funds’ portfolios at the end of the fourth quarter of 2020. The all time high for this statistic was previously 47. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. Our calculations also showed that TDOC isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings).
In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey’s monthly stock picks returned 197% since March 2017 and outperformed the S&P 500 ETFs by more than 124 percentage points. Our short strategy outperformed the S&P 500 short ETFs by 20 percentage points annually (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, lithium mining is one of the fastest growing industries right now, so we are checking out stock pitches like this emerging lithium stock. We go through lists like the 10 best hydrogen fuel cell stocks to pick the next Tesla that will deliver a 10x return. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our homepage (or at the end of this article). Keeping this in mind let’s take a gander at the fresh hedge fund action encompassing Teladoc Health, Inc (NYSE:TDOC).
Do Hedge Funds Think TDOC Is A Good Stock To Buy Now?
At Q4’s end, a total of 50 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 6% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards TDOC over the last 22 quarters. So, let’s find out 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, ARK Investment Management, managed by Catherine D. Wood, holds the largest position in Teladoc Health, Inc (NYSE:TDOC). ARK Investment Management has a $1.5662 billion position in the stock, comprising 4.2% of its 13F portfolio. Coming in second is Arrowstreet Capital, led by Peter Rathjens, Bruce Clarke and John Campbell, holding a $349.3 million position; the fund has 0.5% of its 13F portfolio invested in the stock. Other members of the smart money that hold long positions consist of Nancy Zevenbergen’s Zevenbergen Capital Investments, James Crichton’s Hitchwood Capital Management and Jay Chen’s Himension Capital. In terms of the portfolio weights assigned to each position Himension Capital allocated the biggest weight to Teladoc Health, Inc (NYSE:TDOC), around 14.49% of its 13F portfolio. Truvvo Partners is also relatively very bullish on the stock, dishing out 9.95 percent of its 13F equity portfolio to TDOC.
Now, key hedge funds were breaking ground themselves. Hitchwood Capital Management, managed by James Crichton, created the largest position in Teladoc Health, Inc (NYSE:TDOC). Hitchwood Capital Management had $65.1 million invested in the company at the end of the quarter. Jay Chen’s Himension Capital also initiated a $43.1 million position during the quarter. The following funds were also among the new TDOC investors: Bobby Yazdani and Babak Poushanchi’s Cota Capital, David Atterbury’s Whetstone Capital Advisors, and Henrik Rhenman’s Rhenman & Partners Asset Management.
Let’s now review hedge fund activity in other stocks similar to Teladoc Health, Inc (NYSE:TDOC). We will take a look at Huazhu Group Limited (NASDAQ:HTHT), Corteva, Inc. (NYSE:CTVA), Motorola Solutions Inc (NYSE:MSI), Stanley Black & Decker, Inc. (NYSE:SWK), Canadian Natural Resources Limited (NYSE:CNQ), Archer Daniels Midland Company (NYSE:ADM), and Fastenal Company (NASDAQ:FAST). This group of stocks’ market valuations match TDOC’s market valuation.
|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 32.6 hedge funds with bullish positions and the average amount invested in these stocks was $756 million. That figure was $2617 million in TDOC’s case. Corteva, Inc. (NYSE:CTVA) is the most popular stock in this table. On the other hand Huazhu Group Limited (NASDAQ:HTHT) is the least popular one with only 23 bullish hedge fund positions. Compared to these stocks Teladoc Health, Inc (NYSE:TDOC) is more popular among hedge funds. Our overall hedge fund sentiment score for TDOC is 88. 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. Our calculations showed that top 30 most popular stocks among hedge funds returned 81.2% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 26 percentage points. These stocks gained 5.3% in 2021 through March 19th and still beat the market by 0.8 percentage points. Unfortunately TDOC wasn’t nearly as popular as these 30 stocks and hedge funds that were betting on TDOC were disappointed as the stock returned -4.5% since the end of the fourth quarter (through 3/19) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 30 most popular stocks among hedge funds as most of these stocks already outperformed the market since 2019.
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Disclosure: None. This article was originally published at Insider Monkey.