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Hedge Funds Have Never Been This Bullish On Quest Diagnostics Incorporated (DGX)

The latest 13F reporting period has come and gone, and Insider Monkey have plowed through 823 13F filings that hedge funds and well-known value investors are required to file by the SEC. The 13F filings show the funds’ and investors’ portfolio positions as of June 30th, when the S&P 500 Index was trading around the 3100 level. Since the end of March, investors decided to bet on the economic recovery and a stock market rebound. S&P 500 Index returned more than 50% since its bottom. In this article you are going to find out whether hedge funds thought Quest Diagnostics Incorporated (NYSE:DGX) was a good investment heading into the third quarter and how the stock traded in comparison to the top hedge fund picks.

Quest Diagnostics Incorporated (NYSE:DGX) investors should pay attention to an increase in enthusiasm from smart money in recent months. Quest Diagnostics Incorporated (NYSE:DGX) was in 46 hedge funds’ portfolios at the end of the second quarter of 2020. The all time high for this statistics is 38. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. Our calculations also showed that DGX 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.

At the moment there are tons of formulas investors use to size up stocks. A couple of the most useful formulas are hedge fund and insider trading sentiment. Our experts have shown that, historically, those who follow the best picks of the elite money managers can outpace the market by a very impressive margin (see the details here).

GLENVIEW CAPITAL

Larry Robbins of Glenview Capital

At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, legal marijuana is one of the fastest growing industries right now, so we are checking out stock pitches like “the Starbucks of cannabis” to identify the next tenbagger. Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost precious metals prices. So, we are checking out this junior gold mining stock. 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. Keeping this in mind we’re going to check out the latest hedge fund action encompassing Quest Diagnostics Incorporated (NYSE:DGX).

How have hedgies been trading Quest Diagnostics Incorporated (NYSE:DGX)?

At the end of the second quarter, a total of 46 of the hedge funds tracked by Insider Monkey were long this stock, a change of 21% from the first quarter of 2020. By comparison, 24 hedge funds held shares or bullish call options in DGX a year ago. With the smart money’s positions undergoing their usual ebb and flow, there exists an “upper tier” of noteworthy hedge fund managers who were upping their holdings considerably (or already accumulated large positions).

Among these funds, Citadel Investment Group held the most valuable stake in Quest Diagnostics Incorporated (NYSE:DGX), which was worth $139.8 million at the end of the third quarter. On the second spot was Millennium Management which amassed $88.5 million worth of shares. Two Sigma Advisors, Glenview Capital, and Polar Capital 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 Tamarack Capital Management allocated the biggest weight to Quest Diagnostics Incorporated (NYSE:DGX), around 8.73% of its 13F portfolio. Sivik Global Healthcare is also relatively very bullish on the stock, setting aside 4.72 percent of its 13F equity portfolio to DGX.

Now, key hedge funds have been driving this bullishness. Millennium Management, managed by Israel Englander, assembled the most valuable position in Quest Diagnostics Incorporated (NYSE:DGX). Millennium Management had $88.5 million invested in the company at the end of the quarter. Larry Robbins’s Glenview Capital also initiated a $62.2 million position during the quarter. The other funds with new positions in the stock are Brian Ashford-Russell and Tim Woolley’s Polar Capital, Dmitry Balyasny’s Balyasny Asset Management, and Aaron Cowen’s Suvretta Capital Management.

Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as Quest Diagnostics Incorporated (NYSE:DGX) but similarly valued. We will take a look at Cardinal Health, Inc. (NYSE:CAH), Tractor Supply Company (NASDAQ:TSCO), CBRE Group, Inc. (NYSE:CBRE), BioNTech SE (NASDAQ:BNTX), The Cooper Companies, Inc. (NYSE:COO), Warner Music Group Corp. (NASDAQ:WMG), and Campbell Soup Company (NYSE:CPB). This group of stocks’ market valuations match DGX’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
CAH 49 956785 5
TSCO 38 828499 1
CBRE 29 1442786 -4
BNTX 15 367554 9
COO 34 876136 9
WMG 31 592226 31
CPB 32 450053 -8
Average 32.6 787720 6.1

View table here if you experience formatting issues.

As you can see these stocks had an average of 32.6 hedge funds with bullish positions and the average amount invested in these stocks was $788 million. That figure was $804 million in DGX’s case. Cardinal Health, Inc. (NYSE:CAH) is the most popular stock in this table. On the other hand BioNTech SE (NASDAQ:BNTX) is the least popular one with only 15 bullish hedge fund positions. Quest Diagnostics Incorporated (NYSE:DGX) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for DGX is 85.6. 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. This is a slightly positive signal but we’d rather spend our time researching stocks that hedge funds are piling on. 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 33% in 2020 through the end of August and beat the market by 23.2 percentage points. Unfortunately DGX wasn’t nearly as popular as these 10 stocks and hedge funds that were betting on DGX were disappointed as the stock returned -1.9% during the same time period and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 10 most popular stocks among hedge funds as many of these stocks already outperformed the market so far this year.

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