Although the masses and most of the financial media blame hedge funds for their exorbitant fee structure and disappointing performance, these investors have proven to have great stock-picking ability over the years (which is why their assets under management continue to swell up). We believe that hedge fund sentiment should serve as a crucial tool for an individual investor’s stock selection process, as it can offer great insights into how the brightest minds in the financial industry feel about specific stocks. After all, these people have access to the smartest analysts and expensive data / information sources that individual investors cannot match. So, should you consider investing in Teladoc Health, Inc (NYSE: TDOC)? The sentiment of smart money can provide an answer to that question.
Are TDOC shares a buy or sell? The best stock pickers were becoming more optimistic. The number of bullish hedge fund bets has increased by 3 recently. Teladoc Health, Inc (NYSE: TDOC) was in 50 hedge fund portfolios at the end of the fourth quarter of 2020. The historical maximum for this statistic was previously 47. This means that the bullish number of hedge fund positions in this action currently sits at its highest point. Our calculations also showed that TDOC is not among the 30 most popular stocks among hedge funds (click to view fourth quarter ratings).
In the financial world, there are a large number of tools available to investors to value stocks. Two of the most unknown tools are hedge funds and insider trading indicators. We have shown that, historically, those who follow the top choices of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey’s monthly stock choices have returned 197% since March 2017 and outperformed the S&P 500 ETFs by more than 124 percentage points. Our short strategy outperformed the short S&P 500 ETFs by 20 percentage points a year (see details here). That is why we believe that hedge fund sentiment is a useful indicator that investors should pay attention to.
Henrik Rhenman of Rhenman & Partners Asset Management
At Insider Monkey, we leave no stone unturned when looking for the next big investment idea. For example, lithium mining is one of the fastest growing industries at the moment, so we are looking at proposals for actions like this emerging lithium stock. We looked at lists like the top 10 hydrogen fuel cell stocks to choose the next Tesla that will provide a 10-fold return. Although we recommend positions in only a small fraction of the companies we analyze, we check as many shares as possible. We read letters from hedge fund investors and heard stock presentations at hedge fund conferences. You can subscribe to our free daily newsletter on our homepage (or at the end of this article). With that in mind, let’s take a look at the new hedge fund action covering Teladoc Health, Inc (NYSE: TDOC).
Do hedge funds think TDOC is a good move to buy now?
At the end of the fourth quarter, a total of 50 of the hedge funds monitored by Insider Monkey held long positions in this share, a 6% change from the previous quarter. Below, you can see the change in hedge fund sentiment towards TDOC over the past 22 quarters. So let’s find out which hedge funds were among the biggest holders of the shares and which hedge funds were making big moves.
Looking at 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 position of $ 1.5662 billion in shares, comprising 4.2% of its 13F portfolio. Second is Arrowstreet Capital, led by Peter Rathjens, Bruce Clarke and John Campbell, with a position of $ 349.3 million; the fund has 0.5% of its 13F portfolio invested in shares. Other smart money members who hold long positions include Nancy Zevenbergen’s Zevenbergen Capital Investments, James Crichton’s Hitchwood Capital Management and Jay Chen’s Himension Capital. In terms of portfolio weights assigned to each position, Himension Capital attributed the largest weight to Teladoc Health, Inc (NYSE: TDOC), about 14.49% of its 13F portfolio. Truvvo Partners is also relatively optimistic about the shares, distributing 9.95% of its 13F share portfolio to TDOC.
Now, the main hedge funds were opening up. 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 started a $ 43.1 million position during the quarter. The following funds were also among TDOC’s new investors: Bobby Yazdani and Babak Poushanchi’s Cota Capital, David Atterbury’s Whetstone Capital Advisors and Henrik Rhenman’s Rhenman & Partners Asset Management.
We will now review the activity of hedge funds in other actions similar to Teladoc Health, Inc (NYSE: TDOC). Let’s 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 stock market assessments corresponds to TDOC’s market assessment.
[table] Ticker, number of HFs with positions, total value of HF positions (x1000), change in HF position HTHT, 23.612105.2 CTVA, 38.1398326.2 MSI, 35.777259.6 SWK, 38.846102.0 CNQ, 29.341108 , -1 ADM, 35.703261.9 FAST, 30.612311, -8 Average, 32.6.755782.1.4 [/table]
See the table here if you have formatting problems.
As you can see, these shares had an average of 32.6 hedge funds with optimistic positions and the average amount invested in these shares was US $ 756 million. That number was $ 2,617 million in the case of TDOC. Corteva, Inc. (NYSE: CTVA) is the most popular stock on this table. On the other hand, Huazhu Group Limited (NASDAQ: HTHT) is the least popular, with only 23 bullish hedge fund positions. In comparison to these stocks, Teladoc Health, Inc (NYSE: TDOC) is more popular among hedge funds. Our overall TDOC hedge fund sentiment score is 88. Shares with the highest number of hedge fund positions in relation to other stocks, as well as in relation to their historical range, receive a higher sentiment score. Our calculations showed that the 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 shares gained 5.3% in 2021 through March 19 and still outperformed the market by 0.8 percentage points. Unfortunately, TDOC was not as popular as those 30 stocks and hedge funds that were betting on TDOC were disappointed, as the shares had a return of -4.5% since the end of the fourth quarter (up to 3/19) and a underperforming the market. If you are interested in investing in large-cap stocks with great appreciation potential, you should check out the 30 most popular stocks among hedge funds, as most of these stocks have already outperformed the market since 2019.
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Disclosure: None. This article was originally published on Insider Monkey.
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