In this article we will analyze whether CVS Health Corporation (NYSE:CVS) 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 by double digits annually.
CVS Health Corporation (NYSE:CVS) was in 67 hedge funds’ portfolios at the end of June. The all time high for this statistic is 77. CVS has seen an increase in support from the world’s most elite money managers recently. There were 62 hedge funds in our database with CVS holdings at the end of March. Our calculations also showed that CVS isn’t among the 30 most popular stocks among hedge funds (click for Q2 rankings).
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 185.4% since March 2017 and outperformed the S&P 500 ETFs by more than 79 percentage points (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
Louis Bacon Moore of Moore Capital
At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium mining is one of the fastest growing industries right now, so we are checking out stock pitches like this emerging lithium stock. 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. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our homepage. Now let’s review the new hedge fund action surrounding CVS Health Corporation (NYSE:CVS).
Do Hedge Funds Think CVS Is A Good Stock To Buy Now?
At Q2’s end, a total of 67 of the hedge funds tracked by Insider Monkey were long this stock, a change of 8% from the previous quarter. The graph below displays the number of hedge funds with bullish position in CVS over the last 24 quarters. With hedge funds’ positions undergoing their usual ebb and flow, there exists a select group of noteworthy hedge fund managers who were increasing their stakes meaningfully (or already accumulated large positions).
The largest stake in CVS Health Corporation (NYSE:CVS) was held by Citadel Investment Group, which reported holding $299.9 million worth of stock at the end of June. It was followed by Renaissance Technologies with a $128.6 million position. Other investors bullish on the company included Adage Capital Management, Healthcor Management LP, and Pzena Investment Management. In terms of the portfolio weights assigned to each position Healthcor Management LP allocated the biggest weight to CVS Health Corporation (NYSE:CVS), around 4.23% of its 13F portfolio. Chiron Investment Management is also relatively very bullish on the stock, dishing out 3.07 percent of its 13F equity portfolio to CVS.
Consequently, key money managers were breaking ground themselves. Healthcor Management LP, managed by Arthur B Cohen and Joseph Healey, created the most valuable position in CVS Health Corporation (NYSE:CVS). Healthcor Management LP had $105.7 million invested in the company at the end of the quarter. James Crichton’s Hitchwood Capital Management also made a $30 million investment in the stock during the quarter. The following funds were also among the new CVS investors: Ryan Caldwell’s Chiron Investment Management, Louis Bacon’s Moore Global Investments, and Frank Brosens’s Taconic Capital.
Let’s go over hedge fund activity in other stocks similar to CVS Health Corporation (NYSE:CVS). These stocks are Intuitive Surgical, Inc. (NASDAQ:ISRG), ServiceNow Inc (NYSE:NOW), Snap Inc. (NYSE:SNAP), Lockheed Martin Corporation (NYSE:LMT), GlaxoSmithKline plc (NYSE:GSK), S&P Global Inc. (NYSE:SPGI), and Stryker Corporation (NYSE:SYK). All of these stocks’ market caps are closest to CVS’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| ISRG | 60 | 3475820 | 7 |
| NOW | 91 | 7011424 | -7 |
| SNAP | 64 | 5399955 | -9 |
| LMT | 58 | 1565723 | 8 |
| GSK | 28 | 1466364 | 3 |
| SPGI | 71 | 7278360 | 5 |
| SYK | 48 | 3369193 | 2 |
| Average | 60 | 4223834 | 1.3 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 60 hedge funds with bullish positions and the average amount invested in these stocks was $4224 million. That figure was $1355 million in CVS’s case. ServiceNow Inc (NYSE:NOW) is the most popular stock in this table. On the other hand GlaxoSmithKline plc (NYSE:GSK) is the least popular one with only 28 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 67.1. 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 25.7% in 2021 through September 27th and beat the market again by 6.2 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 3.4% since the end of June (through 9/27) 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.
