Is CVS Health Corporation (NYSE:CVS) a good investment right now? We check hedge fund and billionaire investor sentiment before delving into hours of research. Hedge funds spend millions of dollars on Ivy League graduates, expert networks, and get tips from industry insiders. They sometimes fail miserably but historically their consensus stock picks outperformed the market after adjusting for known risk factors.
Is CVS Health Corporation (NYSE:CVS) undervalued? Some hedge funds believe so, as the number of bullish hedge fund shareholders of the stock ticked up in Q3. While that wasn’t enough to land CVS on our ranking of the 30 Most Popular Stocks Among Hedge Funds, it did rank 19th among the 20 Dividend Stocks That Billionaires Are Piling On, being owned by Larry Robbins’ healthcare fund Glenview Capital and Steve Cohen’s Point72 Asset Management, among others.
At the moment there are several tools stock traders have at their disposal to analyze publicly traded companies. Two of the less utilized tools are hedge fund and insider trading sentiment. We have shown that, historically, those who follow the top picks of the top hedge fund managers can outperform the S&P 500 by a healthy margin (see the details here).
What does the smart money think about CVS Health Corporation (NYSE:CVS)?
At Q3’s end, a total of 49 of the hedge funds tracked by Insider Monkey were long this stock, a 4% rise from the previous quarter. On the other hand, there were a total of 53 hedge funds with a bullish position in CVS at the beginning of this year. So, let’s review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Among these funds, Glenview Capital held the most valuable stake in CVS Health Corporation (NYSE:CVS), which was worth $520.7 million at the end of the third quarter. On the second spot was Diamond Hill Capital which amassed $204.5 million worth of shares. Moreover, Point72 Asset Management and Citadel Investment Group were also bullish on CVS Health Corporation (NYSE:CVS), allocating a large percentage of their portfolios to this stock.
Now, some big names were breaking ground themselves. Diamond Hill Capital, managed by Ric Dillon, established the largest position in CVS Health Corporation (NYSE:CVS). Doug Silverman and Alexander Klabin’s Senator Investment Group also made a $111.9 million investment in the stock during the quarter. The following funds were also among the new CVS investors: Arthur B Cohen and Joseph Healey’s Healthcor Management LP, Mike Masters’s Masters Capital Management, and Zach Schreiber’s Point State Capital.
Let’s now review hedge fund activity in other stocks similar to CVS Health Corporation (NYSE:CVS). These stocks are Baidu.com, Inc. (NASDAQ:BIDU), NextEra Energy, Inc. (NYSE:NEE), Petroleo Brasileiro Petrobras SA (NYSE:PBR), and Sony Corporation (NYSE:SNE). This group of stocks’ market values are similar to CVS’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| BIDU | 53 | 4052257 | -14 |
| NEE | 32 | 1164363 | 1 |
| PBR | 28 | 2056204 | 0 |
| SNE | 27 | 709311 | 3 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 35 hedge funds with bullish positions and the average amount invested in these stocks was $2.00 billion. That figure was $1.93 billion in CVS’s case. Baidu.com, Inc. (NASDAQ:BIDU) is the most popular stock in this table. On the other hand Sony Corporation (NYSE:SNE) is the least popular one with only 27 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. This is a slightly positive signal, and we like the fact that billionaires are particularly bullish on the stock. Given its extremely low dividend payout ratio (28.54%) and history of raising dividends, it also looks like a great investment idea for dividend investors.
Disclosure: None. This article was originally published at Insider Monkey.
