Coronavirus is probably the #1 concern in investors’ minds right now. It should be. On February 27th we published an article with the title Recession is Imminent: We Need A Travel Ban NOW. We predicted that a US recession is imminent and US stocks will go down by at least 20% in the next 3-6 months. We also told you to short the market ETFs and buy long-term bonds. Investors who agreed with us and replicated these trades are up double digits whereas the market is down double digits. Our article also called for a total international travel ban to prevent the spread of the coronavirus especially from Europe. We were one step ahead of the markets and the president (see why hell is coming).
In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. Keeping this in mind, let’s analyze whether Teladoc Inc (NYSE:TDOC) is a good investment right now by following the lead of some of the best investors in the world and piggybacking their ideas. There’s no better way to get these firms’ immense resources and analytical capabilities working for us than to follow their lead into their best ideas. While not all of these picks will be winners, our research shows that these picks historically outperformed the market when we factor in known risk factors.
Is Teladoc Inc (NYSE:TDOC) an outstanding investment right now? Prominent investors are buying. The number of bullish hedge fund bets inched up by 3 lately. Our calculations also showed that TDOC isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings and see the video at the end of this article for Q3 rankings). TDOC was in 23 hedge funds’ portfolios at the end of the fourth quarter of 2019. There were 20 hedge funds in our database with TDOC positions at the end of the previous quarter.
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 72.9% since March 2017 and outperformed the S&P 500 ETFs by more than 41 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.
Mario Gabelli of GAMCO Investors
We leave no stone unturned when looking for the next great investment idea. For example we recently identified a stock that trades 25% below the net cash on its balance sheet. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences, and go through short-term trade recommendations like this one. We even check out the recommendations of services with hard to believe track records. Our best call in 2020 was shorting the market when S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. With all of this in mind we’re going to take a look at the fresh hedge fund action regarding Teladoc Inc (NYSE:TDOC).
How are hedge funds trading Teladoc Inc (NYSE:TDOC)?
At Q4’s end, a total of 23 of the hedge funds tracked by Insider Monkey were long this stock, a change of 15% from the previous quarter. The graph below displays the number of hedge funds with bullish position in TDOC over the last 18 quarters. So, let’s check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
More specifically, Zevenbergen Capital Investments was the largest shareholder of Teladoc Inc (NYSE:TDOC), with a stake worth $134 million reported as of the end of September. Trailing Zevenbergen Capital Investments was Renaissance Technologies, which amassed a stake valued at $45.4 million. Sectoral Asset Management, GAMCO Investors, and Point72 Asset Management were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position Zevenbergen Capital Investments allocated the biggest weight to Teladoc Inc (NYSE:TDOC), around 4.97% of its 13F portfolio. Sectoral Asset Management is also relatively very bullish on the stock, designating 3.73 percent of its 13F equity portfolio to TDOC.
As aggregate interest increased, some big names have jumped into Teladoc Inc (NYSE:TDOC) headfirst. Renaissance Technologies created the biggest position in Teladoc Inc (NYSE:TDOC). Renaissance Technologies had $45.4 million invested in the company at the end of the quarter. Steve Cohen’s Point72 Asset Management also made a $16.7 million investment in the stock during the quarter. The following funds were also among the new TDOC investors: Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital, Michael Gelband’s ExodusPoint Capital, and John Overdeck and David Siegel’s Two Sigma Advisors.
Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as Teladoc Inc (NYSE:TDOC) but similarly valued. These stocks are Texas Pacific Land Trust (NYSE:TPL), Braskem SA (NYSE:BAK), Cousins Properties Incorporated (NYSE:CUZ), and Performance Food Group Company (NYSE:PFGC). All of these stocks’ market caps are closest to TDOC’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| TPL | 17 | 1468604 | 5 |
| BAK | 5 | 54783 | 5 |
| CUZ | 12 | 150948 | -7 |
| PFGC | 31 | 481738 | 5 |
| Average | 16.25 | 539018 | 2 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 16.25 hedge funds with bullish positions and the average amount invested in these stocks was $539 million. That figure was $330 million in TDOC’s case. Performance Food Group Company (NYSE:PFGC) is the most popular stock in this table. On the other hand Braskem SA (NYSE:BAK) is the least popular one with only 5 bullish hedge fund positions. Teladoc Inc (NYSE:TDOC) is not the most popular stock in this group but hedge fund interest is still above average. Our calculations showed that top 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks lost 17.4% in 2020 through March 25th but still beat the market by 5.5 percentage points. Hedge funds were also right about betting on TDOC as the stock returned 69.7% during the first quarter (through March 25th) and outperformed the market. Hedge funds were rewarded for their relative bullishness.
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Disclosure: None. This article was originally published at Insider Monkey.
