After several tireless days we have finished crunching the numbers from nearly 900 13F filings issued by the elite hedge funds and other investment firms that we track at Insider Monkey, which disclosed those firms’ equity portfolios as of September 30th. The results of that effort will be put on display in this article, as we share valuable insight into the smart money sentiment towards CVS Health Corporation (NYSE:CVS).
Is CVS Health Corporation (NYSE:CVS) a bargain? Hedge funds were in a pessimistic mood. 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).
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. Keeping this in mind let’s check out the fresh hedge fund action regarding CVS Health Corporation (NYSE:CVS).
Ken Heebner of Capital Growth Management
Do Hedge Funds Think CVS Is A Good Stock To Buy Now?
At the end of the third quarter, a total of 61 of the hedge funds tracked by Insider Monkey were long this stock, a change of -9% from one quarter earlier. On the other hand, there were a total of 61 hedge funds with a bullish position in CVS a year ago. So, let’s check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Among these funds, Citadel Investment Group held the most valuable stake in CVS Health Corporation (NYSE:CVS), which was worth $247.7 million at the end of the third quarter. On the second spot was Adage Capital Management which amassed $119.8 million worth of shares. Bridgewater Associates, AQR Capital Management, and Chilton Investment Company 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 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, dishing out 5.08 percent of its 13F equity portfolio to CVS.
Due to the fact that CVS Health Corporation (NYSE:CVS) has faced falling interest from hedge fund managers, it’s safe to say that there was a specific group of funds that slashed their full holdings last quarter. Interestingly, Richard S. Pzena’s Pzena Investment Management sold off the biggest stake of the “upper crust” of funds tracked by Insider Monkey, valued at about $103.1 million in call options. Michael Burry’s fund, Scion Asset Management, also sold off its call options, about $43.8 million worth. These transactions are interesting, as aggregate hedge fund interest dropped by 6 funds last quarter.
Let’s check out hedge fund activity in other stocks similar to CVS Health Corporation (NYSE:CVS). 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). This group of stocks’ market caps match 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. 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 28.6% in 2021 through November 30th and beat the market again by 5.6 percentage points. Unfortunately CVS wasn’t nearly as popular as these 5 stocks and hedge funds that were betting on CVS were disappointed as the stock returned 5.6% since the end of September (through 11/30) 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 many of these stocks already outperformed the market since 2019.
Follow Cvs Health Corp (NYSE:CVS)
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Disclosure: None. This article was originally published at Insider Monkey.
