Laboratory Corp. of America Holdings (NYSE:LH) has seen a decrease in support from the world's most elite money managers in recent months.
In the eyes of most traders, hedge funds are viewed as unimportant, old financial tools of yesteryear. While there are greater than 8000 funds with their doors open at the moment, we choose to focus on the masters of this club, about 450 funds. It is widely believed that this group controls most of the hedge fund industry's total capital, and by watching their highest performing picks, we have formulated a few investment strategies that have historically outperformed the S&P 500 index. Our small-cap hedge fund strategy outstripped the S&P 500 index by 18 percentage points a year for a decade in our back tests, and since we've started sharing our picks with our subscribers at the end of August 2012, we have beaten the S&P 500 index by 25 percentage points in 6.5 month (see all of our picks from August).
Just as key, positive insider trading activity is another way to parse down the financial markets. There are plenty of reasons for an insider to cut shares of his or her company, but only one, very clear reason why they would behave bullishly. Many empirical studies have demonstrated the useful potential of this strategy if piggybackers understand what to do (learn more here).
Now, let's take a look at the recent action surrounding Laboratory Corp. of America Holdings (NYSE:LH).
At year's end, a total of 23 of the hedge funds we track held long positions in this stock, a change of -15% from the previous quarter. With hedge funds' capital changing hands, there exists an "upper tier" of noteworthy hedge fund managers who were upping their holdings substantially.
When looking at the hedgies we track, John Shapiro's Chieftain Capital had the largest position in Laboratory Corp. of America Holdings (NYSE:LH), worth close to $130 million, comprising 10.3% of its total 13F portfolio. Sitting at the No. 2 spot is Orbis Investment Management, managed by William B. Gray, which held a $95 million position; 0.7% of its 13F portfolio is allocated to the company. Remaining hedge funds that are bullish include Richard S. Pzena's Pzena Investment Management, Michael A. Price and Amos Meron's Empyrean Capital Partners and Wallace Weitz's Wallace R. Weitz & Co..
Due to the fact that Laboratory Corp. of America Holdings (NYSE:LH) has experienced a declination in interest from hedge fund managers, it's safe to say that there exists a select few hedgies that decided to sell off their full holdings at the end of the year. It's worth mentioning that Glenn Greenberg's Brave Warrior Capital cut the biggest position of the 450+ funds we monitor, totaling about $78 million in stock., and Scott McLellan of Marble Arch Investments was right behind this move, as the fund cut about $37 million worth. These transactions are interesting, as total hedge fund interest dropped by 4 funds at the end of the year.
Insider purchases made by high-level executives is most useful when the company in question has experienced transactions within the past half-year. Over the last 180-day time period, Laboratory Corp. of America Holdings (NYSE:LH) has experienced zero unique insiders buying, and zero insider sales (see the details of insider trades here).
With the results exhibited by our time-tested strategies, everyday investors should always monitor hedge fund and insider trading sentiment, and Laboratory Corp. of America Holdings (NYSE:LH) is an important part of this process.
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