Many prominent investors, including Warren Buffett, David Tepper and Stan Druckenmiller, have been cautious regarding the current bull market and missed out as the stock market reached another high in recent weeks. On the other hand, technology hedge funds weren’t timid and registered double digit market beating gains. Financials, energy and industrial stocks initially suffered the most but many of these stocks delivered strong returns since November and hedge funds actually increased their positions in these stocks. In this article we will find out how hedge fund sentiment towards CVS Health Corporation (NYSE:CVS) changed recently.
CVS Health Corporation (NYSE:CVS) was in 67 hedge funds’ portfolios at the end of the second quarter of 2021. The all time high for this statistic is 77. CVS shareholders have witnessed an increase in support from the world’s most elite money managers lately. 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).
Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. Our research has shown that hedge funds’ small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by 79 percentage points since March 2017 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter.
Ricky Sandler of Eminence Capital
At Insider Monkey, we scour multiple sources to uncover the next great investment idea. We check out articles like Warren Buffett’s 3 money saving tips that provide inflation and volatility hedges. 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 let’s take a look at the recent hedge fund action regarding CVS Health Corporation (NYSE:CVS).
Do Hedge Funds Think CVS Is A Good Stock To Buy Now?
Heading into the third quarter of 2021, a total of 67 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 8% from one quarter earlier. On the other hand, there were a total of 65 hedge funds with a bullish position in CVS a year ago. So, let’s examine 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 $299.9 million at the end of the second quarter. On the second spot was Renaissance Technologies which amassed $128.6 million worth of shares. Adage Capital Management, Healthcor Management LP, and Pzena Investment 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 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, earmarking 3.07 percent of its 13F equity portfolio to CVS.
Consequently, key hedge funds have been driving this bullishness. Healthcor Management LP, managed by Arthur B Cohen and Joseph Healey, assembled the most outsized 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 initiated a $30 million position 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 now take a look at hedge fund activity in other stocks – not necessarily in the same industry as CVS Health Corporation (NYSE:CVS) but similarly valued. 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). This group of stocks’ market caps resemble 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. 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 26.3% in 2021 through October 29th and still beat the market by 2.3 percentage points. Hedge funds were also right about betting on CVS as the stock returned 8.3% since the end of Q2 (through 10/29) and outperformed the market. Hedge funds were rewarded for their relative bullishness.
Follow Cvs Health Corp (NYSE:CVS)
Follow Cvs Health Corp (NYSE:CVS)
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Disclosure: None. This article was originally published at Insider Monkey.
