Was The Smart Money Right About Teladoc Health, Inc (TDOC)?

Hedge Funds and other institutional investors have just completed filing their 13Fs with the Securities and Exchange Commission, revealing their equity portfolios as of the end of June. At Insider Monkey, we follow nearly 900 active hedge funds and notable investors and by analyzing their 13F filings, we can determine the stocks that they are collectively bullish on. One of their picks is Teladoc Health, Inc (NYSE:TDOC), so let’s take a closer look at the sentiment that surrounds it in the current quarter.

Teladoc Health, Inc (NYSE:TDOC) investors should be aware of an increase in hedge fund interest of late. Teladoc Health, Inc (NYSE:TDOC) was in 43 hedge funds’ portfolios at the end of the second quarter of 2021. The all time high for this statistic is 50. Our calculations also showed that TDOC 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.

Cathie Wood of ARK Investment 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 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. With all of this in mind we’re going to take a look at the recent hedge fund action surrounding Teladoc Health, Inc (NYSE:TDOC).

Do Hedge Funds Think TDOC Is A Good Stock To Buy Now?

At Q2’s end, a total of 43 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 2% from the previous quarter. By comparison, 44 hedge funds held shares or bullish call options in TDOC a year ago. With hedge funds’ sentiment swirling, there exists a few noteworthy hedge fund managers who were adding to their holdings substantially (or already accumulated large positions).

According to Insider Monkey’s hedge fund database, ARK Investment Management, managed by Catherine D. Wood, holds the number one position in Teladoc Health, Inc (NYSE:TDOC). ARK Investment Management has a $2.6635 billion position in the stock, comprising 5% of its 13F portfolio. Coming in second is Ken Griffin of Citadel Investment Group, with a $205.2 million call position; less than 0.1%% of its 13F portfolio is allocated to the company. Other peers that are bullish include Nancy Zevenbergen’s Zevenbergen Capital Investments, Ken Griffin’s Citadel Investment Group and Jay Chen’s Himension Capital. In terms of the portfolio weights assigned to each position Himension Capital allocated the biggest weight to Teladoc Health, Inc (NYSE:TDOC), around 12.84% of its 13F portfolio. ARK Investment Management is also relatively very bullish on the stock, setting aside 4.96 percent of its 13F equity portfolio to TDOC.

Consequently, some big names have been driving this bullishness. Millennium Management, managed by Israel Englander, assembled the biggest call position in Teladoc Health, Inc (NYSE:TDOC). Millennium Management had $25.9 million invested in the company at the end of the quarter. Joseph Edelman’s Perceptive Advisors also initiated a $16.6 million position during the quarter. The other funds with new positions in the stock are David Fiszel’s Honeycomb Asset Management, Jinghua Yan’s TwinBeech Capital, and Kamran Moghtaderi’s Eversept Partners.

Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as Teladoc Health, Inc (NYSE:TDOC) but similarly valued. These stocks are Verisign, Inc. (NASDAQ:VRSN), Telefonica S.A. (NYSE:TEF), Consolidated Edison, Inc. (NYSE:ED), Realty Income Corporation (NYSE:O), DTE Energy Company (NYSE:DTE), ZTO Express (Cayman) Inc. (NYSE:ZTO), and Enphase Energy Inc (NASDAQ:ENPH). This group of stocks’ market valuations match TDOC’s market valuation.

View table here if you experience formatting issues.

As you can see these stocks had an average of 27.9 hedge funds with bullish positions and the average amount invested in these stocks was $1292 million. That figure was $3574 million in TDOC’s case. Enphase Energy Inc (NASDAQ:ENPH) is the most popular stock in this table. On the other hand Telefonica S.A. (NYSE:TEF) is the least popular one with only 4 bullish hedge fund positions. Teladoc Health, Inc (NYSE:TDOC) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for TDOC is 80.6. 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 29.6% in 2021 through November 5th and beat the market again by 3.1 percentage points. Unfortunately TDOC wasn’t nearly as popular as these 5 stocks and hedge funds that were betting on TDOC were disappointed as the stock returned -12.1% since the end of June (through 11/5) 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.

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Disclosure: None. This article was originally published at Insider Monkey.