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Hedge Funds Have Never Been This Bullish On LHC Group, Inc. (LHCG)

How do you pick the next stock to invest in? One way would be to spend days of research browsing through thousands of publicly traded companies. However, an easier way is to look at the stocks that smart money investors are collectively bullish on. Hedge funds and other institutional investors usually invest large amounts of capital and have to conduct due diligence while choosing their next pick. They don’t always get it right, but, on average, their stock picks historically generated strong returns after adjusting for known risk factors. With this in mind, let’s take a look at the recent hedge fund activity surrounding LHC Group, Inc. (NASDAQ:LHCG) and determine whether hedge funds had an edge regarding this stock.

LHC Group, Inc. (NASDAQ:LHCG) has seen an increase in support from the world’s most elite money managers in recent months. LHC Group, Inc. (NASDAQ:LHCG) was in 30 hedge funds’ portfolios at the end of June. The all time high for this statistics is 29. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. Our calculations also showed that LHCG isn’t among the 30 most popular stocks among hedge funds (click for Q2 rankings and see the video for a quick look at the top 5 stocks).

Video: Watch our video about the top 5 most popular hedge fund stocks.

In the financial world there are dozens of formulas investors have at their disposal to assess publicly traded companies. A duo of the most underrated formulas are hedge fund and insider trading sentiment. Our experts have shown that, historically, those who follow the best picks of the top fund managers can outpace their index-focused peers by a healthy margin (see the details here).

Paul Glazer of Glazer Capital

Paul Glazer of Glazer Capital

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, this “mom” trader turned $2000 into $2 million within 2 years. So, we are checking out her best trade idea of the month. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We go through lists like the 10 most profitable companies in the world to pick the best large-cap stocks to buy. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. Now we’re going to take a peek at the recent hedge fund action regarding LHC Group, Inc. (NASDAQ:LHCG).

What have hedge funds been doing with LHC Group, Inc. (NASDAQ:LHCG)?

At the end of June, a total of 30 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 11% from the previous quarter. By comparison, 26 hedge funds held shares or bullish call options in LHCG a year ago. With hedgies’ capital changing hands, there exists a select group of key hedge fund managers who were adding to their stakes considerably (or already accumulated large positions).

According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Paul Glazer’s Glazer Capital has the biggest position in LHC Group, Inc. (NASDAQ:LHCG), worth close to $25.8 million, comprising 1.8% of its total 13F portfolio. The second largest stake is held by Bhagwan Jay Rao of Integral Health Asset Management, with a $21.8 million position; 6.5% of its 13F portfolio is allocated to the stock. Some other peers that are bullish comprise Principal Global Investors’s Columbus Circle Investors, Steven Clark’s Omni Partners and Angela Aldrich’s Bayberry Capital Partners. In terms of the portfolio weights assigned to each position Integral Health Asset Management allocated the biggest weight to LHC Group, Inc. (NASDAQ:LHCG), around 6.53% of its 13F portfolio. Bayberry Capital Partners is also relatively very bullish on the stock, earmarking 3.2 percent of its 13F equity portfolio to LHCG.

Consequently, key hedge funds have jumped into LHC Group, Inc. (NASDAQ:LHCG) headfirst. Pura Vida Investments, managed by Efrem Kamen, assembled the largest position in LHC Group, Inc. (NASDAQ:LHCG). Pura Vida Investments had $11.6 million invested in the company at the end of the quarter. Israel Englander’s Millennium Management also initiated a $8.5 million position during the quarter. The following funds were also among the new LHCG investors: Andrew Weiss’s Weiss Asset Management, Krishen Sud’s Sivik Global Healthcare, and D. E. Shaw’s D E Shaw.

Let’s now take a look at hedge fund activity in other stocks similar to LHC Group, Inc. (NASDAQ:LHCG). These stocks are Prosperity Bancshares, Inc. (NYSE:PB), Legend Biotech Corporation (NASDAQ:LEGN), Deckers Outdoor Corp (NYSE:DECK), Steel Dynamics, Inc. (NASDAQ:STLD), CACI International Inc (NYSE:CACI), Pearson PLC (NYSE:PSO), and Arrow Electronics, Inc. (NYSE:ARW). All of these stocks’ market caps resemble LHCG’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
PB 27 109165 11
LEGN 28 551006 28
DECK 47 857767 16
STLD 30 370392 3
CACI 34 395916 9
PSO 7 14870 -1
ARW 29 531930 6
Average 28.9 404435 10.3

View table here if you experience formatting issues.

As you can see these stocks had an average of 28.9 hedge funds with bullish positions and the average amount invested in these stocks was $404 million. That figure was $159 million in LHCG’s case. Deckers Outdoor Corp (NYSE:DECK) is the most popular stock in this table. On the other hand Pearson PLC (NYSE:PSO) is the least popular one with only 7 bullish hedge fund positions. LHC Group, Inc. (NASDAQ:LHCG) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for LHCG is 66.8. 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 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 23.8% in 2020 through September 14th and still beat the market by 17.6 percentage points. Hedge funds were also right about betting on LHCG as the stock returned 17.8% during Q3 (through September 14th) and outperformed the market. Hedge funds were rewarded for their relative bullishness.

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