Insider Monkey has processed numerous 13F filings of hedge funds and successful value investors to create an extensive database of hedge fund holdings. The 13F filings show the hedge funds’ and successful investors’ positions as of the end of the third quarter. You can find articles about an individual hedge fund’s trades on numerous financial news websites. However, in this article we will take a look at their collective moves over the last 6 years and analyze what the smart money thinks of CVS Health Corporation (NYSE:CVS) based on that data and determine whether they were really smart about the stock.
Is CVS Health Corporation (NYSE:CVS) an excellent investment right now? Money managers were turning less bullish. The number of bullish hedge fund bets fell by 6 recently. CVS Health Corporation (NYSE:CVS) was in 61 hedge funds’ portfolios at the end of September. The all time high for this statistic is 77. Our calculations also showed that CVS isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings).
Ken Heebner of Capital Growth Management
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. With all of this in mind we’re going to review the new hedge fund action regarding CVS Health Corporation (NYSE:CVS).
Do Hedge Funds Think CVS Is A Good Stock To Buy Now?
At Q3’s end, a total of 61 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -9% from the previous quarter. By comparison, 61 hedge funds held shares or bullish call options in CVS 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.
The largest stake in CVS Health Corporation (NYSE:CVS) was held by Citadel Investment Group, which reported holding $247.7 million worth of stock at the end of September. It was followed by Adage Capital Management with a $119.8 million position. Other investors bullish on the company included Bridgewater Associates, AQR Capital Management, and Chilton Investment Company. In terms of the portfolio weights assigned to each position Scion Asset Management allocated the biggest weight to CVS Health Corporation (NYSE:CVS), around 40.68% of its 13F portfolio. Chiron Investment Management is also relatively very bullish on the stock, designating 5.08 percent of its 13F equity portfolio to CVS.
Seeing as CVS Health Corporation (NYSE:CVS) has witnessed a decline in interest from hedge fund managers, logic holds that there was a specific group of fund managers who sold off their full holdings by the end of the third quarter. It’s worth mentioning that Richard S. Pzena’s Pzena Investment Management cut the biggest position of the 750 funds monitored by Insider Monkey, totaling about $103.1 million in call options, and Michael Burry’s Scion Asset Management was right behind this move, as the fund cut about $43.8 million worth. These bearish behaviors are important to note, as aggregate hedge fund interest was cut by 6 funds by the end of the third quarter.
Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as CVS Health Corporation (NYSE:CVS) but similarly valued. We will take a look at Target Corporation (NYSE:TGT), Anheuser-Busch InBev SA/NV (NYSE:BUD), Square, Inc. (NYSE:SQ), The Estee Lauder Companies Inc (NYSE:EL), Rio Tinto Group (NYSE:RIO), HSBC Holdings plc (NYSE:HSBC), and Caterpillar Inc. (NYSE:CAT). All of these stocks’ market caps resemble CVS’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| TGT | 49 | 4349899 | -17 |
| BUD | 11 | 826303 | -7 |
| SQ | 98 | 8884931 | 4 |
| EL | 49 | 4137243 | -1 |
| RIO | 20 | 1330364 | -1 |
| HSBC | 10 | 196426 | -1 |
| CAT | 46 | 4778511 | -16 |
| Average | 40.4 | 3500525 | -5.6 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 40.4 hedge funds with bullish positions and the average amount invested in these stocks was $3501 million. That figure was $1061 million in CVS’s case. Square, Inc. (NYSE:SQ) is the most popular stock in this table. On the other hand HSBC Holdings plc (NYSE:HSBC) is the least popular one with only 10 bullish hedge fund positions. CVS Health Corporation (NYSE:CVS) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for CVS is 51.7. 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 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 still beat the market by 3.6 percentage points. Hedge funds were also right about betting on CVS as the stock returned 26.9% since the end of Q3 (through 1/31) 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.
