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Hedge Funds Are Piling Into Tivity Health, Inc. (TVTY)

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Is Tivity Health, Inc. (NASDAQ:TVTY) a good place to invest some of your money right now? We can gain invaluable insight to help us answer that question by studying the investment trends of top investors, who employ world-class Ivy League graduates, who are given immense resources and industry contacts to put their financial expertise to work. The top picks of these firms have historically outperformed the market when we account for known risk factors, making them very valuable investment ideas.

Is Tivity Health, Inc. (NASDAQ:TVTY) a buy here? The smart money was turning bullish. The number of long hedge fund bets inched up by 4 lately. Tivity Health, Inc. (NASDAQ:TVTY) was in 24 hedge funds' portfolios at the end of the first quarter of 2021. The all time high for this statistic is 24. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. Our calculations also showed that TVTY isn't among the 30 most popular stocks among hedge funds (click for Q1 rankings). There were 20 hedge funds in our database with TVTY positions at the end of the fourth quarter.

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.

Bill Miller
Bill Miller

Bill Miller of Miller Value Partners

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, Chuck Schumer recently stated that marijuana legalization will be a Senate priority. So, we are checking out this under the radar stock that will benefit from this. We go through lists like the 10 best battery 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 we're going to review the new hedge fund action regarding Tivity Health, Inc. (NASDAQ:TVTY).

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

Heading into the second quarter of 2021, a total of 24 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 20% from the previous quarter. The graph below displays the number of hedge funds with bullish position in TVTY over the last 23 quarters. With hedge funds' capital changing hands, there exists an "upper tier" of key hedge fund managers who were upping their holdings significantly (or already accumulated large positions).

The largest stake in Tivity Health, Inc. (NASDAQ:TVTY) was held by HG Vora Capital Management, which reported holding $107.1 million worth of stock at the end of December. It was followed by Hudson Executive Capital with a $107 million position. Other investors bullish on the company included Miller Value Partners, Dendur Capital, and Hawk Ridge Management. In terms of the portfolio weights assigned to each position Hudson Executive Capital allocated the biggest weight to Tivity Health, Inc. (NASDAQ:TVTY), around 6.64% of its 13F portfolio. HG Vora Capital Management is also relatively very bullish on the stock, dishing out 5.72 percent of its 13F equity portfolio to TVTY.

Consequently, some big names have jumped into Tivity Health, Inc. (NASDAQ:TVTY) headfirst. Point72 Asset Management, managed by Steve Cohen, initiated the most valuable position in Tivity Health, Inc. (NASDAQ:TVTY). Point72 Asset Management had $12.6 million invested in the company at the end of the quarter. Frank Fu's CaaS Capital also made a $2.8 million investment in the stock during the quarter. The other funds with brand new TVTY positions are Peter Rathjens, Bruce Clarke and John Campbell's Arrowstreet Capital, Parvinder Thiara's Athanor Capital, and Matthew Hulsizer's PEAK6 Capital Management.

Let's also examine hedge fund activity in other stocks - not necessarily in the same industry as Tivity Health, Inc. (NASDAQ:TVTY) but similarly valued. We will take a look at MarineMax, Inc. (NYSE:HZO), ProPetro Holding Corp. (NYSE:PUMP), Zogenix, Inc. (NASDAQ:ZGNX), National Energy Services Reunited Corp. (NASDAQ:NESR), Grupo Financiero Galicia S.A. (NASDAQ:GGAL), Ideanomics, Inc. (NASDAQ:IDEX), and Arcturus Therapeutics Holdings Inc. (NASDAQ:ARCT). This group of stocks' market valuations are closest to TVTY's market valuation.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position HZO,15,48512,-3 PUMP,17,75813,-3 ZGNX,21,377360,-9 NESR,12,58518,4 GGAL,7,7299,-1 IDEX,7,20871,2 ARCT,15,231669,-1 Average,13.4,117149,-1.6 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 13.4 hedge funds with bullish positions and the average amount invested in these stocks was $117 million. That figure was $382 million in TVTY's case. Zogenix, Inc. (NASDAQ:ZGNX) is the most popular stock in this table. On the other hand Grupo Financiero Galicia S.A. (NASDAQ:GGAL) is the least popular one with only 7 bullish hedge fund positions. Compared to these stocks Tivity Health, Inc. (NASDAQ:TVTY) is more popular among hedge funds. Our overall hedge fund sentiment score for TVTY is 89. 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 23.8% in 2021 through July 16th and still beat the market by 7.7 percentage points. Unfortunately TVTY wasn't nearly as popular as these 5 stocks and hedge funds that were betting on TVTY were disappointed as the stock returned 8.7% since the end of the first quarter (through 7/16) 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 most of these stocks already outperformed the market since 2019.

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