Where Do Hedge Funds Stand On CVS Health Corporation (CVS)?

A whopping number of 13F filings filed with U.S. Securities and Exchange Commission has been processed by Insider Monkey so that individual investors can look at the overall hedge fund sentiment towards the stocks included in their watchlists. These freshly-submitted public filings disclose money managers’ equity positions as of the end of the three-month period that ended March 31st, so let’s proceed with the discussion of the hedge fund sentiment on CVS Health Corporation (NYSE:CVS).

CVS Health Corporation (NYSE:CVS) investors should be aware of an increase in hedge fund interest of late. CVS Health Corporation (NYSE:CVS) was in 62 hedge funds’ portfolios at the end of the first quarter of 2021. 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 Q1 rankings).

So, why do we pay attention to hedge fund sentiment before making any investment decisions? 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 more than 115 percentage points since March 2017 (see the details here). We have been able to outperform the passive index funds by tracking the moves of corporate insiders and hedge funds, and we believe small investors can benefit a lot from reading hedge fund investor letters and 13F filings.

Michael Burry of Scion Asset Management

At Insider Monkey we leave no stone unturned when looking for 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 hydrogen fuel cell 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 go over the recent hedge fund action surrounding CVS Health Corporation (NYSE:CVS).

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

At first quarter’s end, a total of 62 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 11% from one quarter earlier. By comparison, 71 hedge funds held shares or bullish call options in CVS a year ago. With the smart money’s capital changing hands, there exists a few key hedge fund managers who were adding to their stakes meaningfully (or already accumulated large positions).

More specifically, Citadel Investment Group was the largest shareholder of CVS Health Corporation (NYSE:CVS), with a stake worth $209.9 million reported as of the end of March. Trailing Citadel Investment Group was Renaissance Technologies, which amassed a stake valued at $134.8 million. Marshall Wace LLP, Adage Capital Management, 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 HealthInvest Partners AB allocated the biggest weight to CVS Health Corporation (NYSE:CVS), around 5.09% of its 13F portfolio. Tamarack Capital Management is also relatively very bullish on the stock, setting aside 3.47 percent of its 13F equity portfolio to CVS.

As industrywide interest jumped, specific money managers have jumped into CVS Health Corporation (NYSE:CVS) headfirst. Renaissance Technologies, created the most valuable position in CVS Health Corporation (NYSE:CVS). Renaissance Technologies had $134.8 million invested in the company at the end of the quarter. Michael Burry’s Scion Asset Management also made a $30.1 million investment in the stock during the quarter. The other funds with brand new CVS positions are Richard Chilton’s Chilton Investment Company, Ricky Sandler’s Eminence Capital, and Zach Schreiber’s Point State Capital.

Let’s now take a look at hedge fund activity in other stocks similar to CVS Health Corporation (NYSE:CVS). We will take a look at ServiceNow Inc (NYSE:NOW), Diageo plc (NYSE:DEO), Booking Holdings Inc. (NASDAQ:BKNG), Advanced Micro Devices, Inc. (NASDAQ:AMD), Altria Group Inc (NYSE:MO), Zoom Video Communications, Inc. (NASDAQ:ZM), and Stryker Corporation (NYSE:SYK). This group of stocks’ market values resemble CVS’s market value.

View table here if you experience formatting issues.

As you can see these stocks had an average of 60.4 hedge funds with bullish positions and the average amount invested in these stocks was $3900 million. That figure was $1316 million in CVS’s case. Booking Holdings Inc. (NASDAQ:BKNG) is the most popular stock in this table. On the other hand Diageo plc (NYSE:DEO) is the least popular one with only 22 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 58.8. 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 17.2% in 2021 through June 11th and still beat the market by 3.3 percentage points. Hedge funds were also right about betting on CVS as the stock returned 14.4% since the end of Q1 (through 6/11) and outperformed the market. Hedge funds were rewarded for their relative bullishness.

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