Was The Smart Money Right About Teladoc Health, Inc (TDOC)?

The latest 13F reporting period has come and gone, and Insider Monkey is again at the forefront when it comes to making use of this gold mine of data. We at Insider Monkey have plowed through 867 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 September 30th. Hedge funds’ consensus stock picks performed spectacularly over the last 3 years, but 2022 hasn’t been kind to hedge funds. In this article we look at how hedge funds traded Teladoc Health, Inc (NYSE:TDOC) and determine whether the smart money was really smart about this stock.

Teladoc Health, Inc (NYSE:TDOC) has experienced a decrease in hedge fund sentiment recently. Teladoc Health, Inc (NYSE:TDOC) was in 40 hedge funds’ portfolios at the end of September. The all time high for this statistic is 50. Our calculations also showed that TDOC isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings).

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium prices have more than doubled over the past year, so we go through lists like the 10 best EV 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. Now let’s take a look at the recent hedge fund action regarding Teladoc Health, Inc (NYSE:TDOC).

Do Hedge Funds Think TDOC Is A Good Stock To Buy Now?

At Q3’s end, a total of 40 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -7% from the previous quarter. The graph below displays the number of hedge funds with bullish position in TDOC over the last 25 quarters. So, let’s review 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, Catherine D. Wood’s ARK Investment Management has the number one position in Teladoc Health, Inc (NYSE:TDOC), worth close to $2.0873 billion, accounting for 5% of its total 13F portfolio. The second most bullish fund manager is Ken Griffin of Citadel Investment Group, with a $250 million call position; 0.1% of its 13F portfolio is allocated to the stock. Other hedge funds and institutional investors with similar optimism contain Ken Griffin’s Citadel Investment Group, Jay Chen’s Himension Capital and Nancy Zevenbergen’s Zevenbergen Capital Investments. In terms of the portfolio weights assigned to each position Copernicus Capital Management allocated the biggest weight to Teladoc Health, Inc (NYSE:TDOC), around 10.75% of its 13F portfolio. Himension Capital is also relatively very bullish on the stock, dishing out 10.11 percent of its 13F equity portfolio to TDOC.

Because Teladoc Health, Inc (NYSE:TDOC) has witnessed declining sentiment from the smart money, we can see that there lies a certain “tier” of hedgies that elected to cut their positions entirely in the third quarter. It’s worth mentioning that Joseph Edelman’s Perceptive Advisors sold off the biggest investment of all the hedgies monitored by Insider Monkey, valued at an estimated $16.6 million in call options. David Fiszel’s fund, Honeycomb Asset Management, also dropped its call options, about $16.6 million worth. These bearish behaviors are intriguing to say the least, as total hedge fund interest was cut by 3 funds in the third quarter.

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 Enphase Energy Inc (NASDAQ:ENPH), Dynatrace, Inc. (NYSE:DT), NetApp Inc. (NASDAQ:NTAP), Teledyne Technologies Incorporated (NYSE:TDY), Citizens Financial Group Inc (NYSE:CFG), Entergy Corporation (NYSE:ETR), and RingCentral Inc (NYSE:RNG). This group of stocks’ market valuations are similar to TDOC’s market valuation.

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As you can see these stocks had an average of 38.9 hedge funds with bullish positions and the average amount invested in these stocks was $1279 million. That figure was $2836 million in TDOC’s case. Enphase Energy Inc (NASDAQ:ENPH) is the most popular stock in this table. On the other hand NetApp Inc. (NASDAQ:NTAP) is the least popular one with only 29 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 49.9. 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 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 29.6% in 2021 and beat the market again by 3.6 percentage points. Unfortunately, TDOC wasn’t nearly as popular as these 5 stocks and hedge funds that were betting on TDOC were disappointed as the stock returned -39.5% since the end of September (through 1/31) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as all of these stocks already outperformed the market since 2019.

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