Is Laboratory Corp. of America Holdings (LH) A Good Stock To Buy?

The worries about the election and the ongoing uncertainty about the path of interest-rate increases have been keeping investors on the sidelines. Of course, most hedge funds and other asset managers have been underperforming main stock market indices since the middle of 2015. Interestingly though, smaller-cap stocks registered their best performance relative to the large-capitalization stocks since the end of the June quarter, suggesting that this may be the best time to take a cue from their stock picks. In fact, the Russell 2000 Index gained more than 15% since the beginning of the third quarter, while the Standard and Poor’s 500 benchmark returned less than 6%. This article will lay out and discuss the hedge fund and institutional investor sentiment towards Laboratory Corp. of America Holdings (NYSE:LH).

Is Laboratory Corp. of America Holdings (NYSE:LH) worth your attention right now? It looks like, the smart money is turning less bullish, as the number of investors from our database long the stock inched down by three to 45 during the third quarter. However, the level and the change in hedge fund popularity aren’t the only variables you need to analyze to decipher hedge funds’ perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That’s why at the end of this article we will examine companies such as Markel Corporation (NYSE:MKL), SK Telecom Co., Ltd. (ADR) (NYSE:SKM), and FleetCor Technologies, Inc. (NYSE:FLT) to gather more data points.

At Insider Monkey, we’ve developed an investment strategy that has delivered market-beating returns over the past 12 months. Our strategy identifies the 100 best-performing funds of the previous quarter from among the collection of 700+ successful funds that we track in our database, which we accomplish using our returns methodology. We then study the portfolios of those 100 funds using the latest 13F data to uncover the 30 most popular mid-cap stocks (market caps of between $1 billion and $10 billion) among them to hold until the next filing period. This strategy delivered 18% gains over the past 12 months, more than doubling the 8% returns enjoyed by the S&P 500 ETFs.

Now, let’s analyze the fresh action regarding Laboratory Corp. of America Holdings (NYSE:LH).

What have hedge funds been doing with Laboratory Corp. of America Holdings (NYSE:LH)?

A total of 45 funds followed by Insider Monkey held long positions in Laboratory Corp. of America at the end of September, down by 6% from one quarter earlier. With hedgies’ capital changing hands, there exists a few notable hedge fund managers who were upping their stakes substantially (or already accumulated large positions).

Of the funds tracked by Insider Monkey, Glenview Capital, managed by Larry Robbins, holds the largest position in Laboratory Corp. of America Holdings (NYSE:LH). Glenview Capital has a $579.1 million position in the stock, comprising 4.1% of its 13F portfolio. Coming in second is John W. Rogers’ Ariel Investments, which holds a $197.8 million position; the fund has 2.4% of its 13F portfolio invested in the stock. Remaining professional money managers that are bullish include David Cohen and Harold Levy’s Iridian Asset Management, John Shapiro’s Chieftain Capital, and Wallace Weitz’s Wallace R. Weitz & Co.

Judging by the fact that Laboratory Corp. of America Holdings (NYSE:LH) has faced bearish sentiment from hedge fund managers, it’s easy to see that there was a specific group of fund managers that decided to sell off their entire stakes last quarter. Interestingly, Dmitry Balyasny’s Balyasny Asset Management sold off the biggest stake of the “upper crust” of funds followed by Insider Monkey, totaling close to $49.5 million in stock. David Harding’s fund, Winton Capital Management, also dropped its position, about $15.9 million worth.

Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as Laboratory Corp. of America Holdings (NYSE:LH) but similarly valued. These stocks are Markel Corporation (NYSE:MKL), SK Telecom Co., Ltd. (ADR) (NYSE:SKM), FleetCor Technologies, Inc. (NYSE:FLT), and Church & Dwight Co., Inc. (NYSE:CHD). All of these stocks’ market caps are closest to LH’s market cap.

As you can see these stocks had an average of 26 investors with long positions and the average amount invested in these stocks was $1.41 billion. That figure was $1.88 billion in LH’s case. FleetCor Technologies, Inc. (NYSE:FLT) is the most popular stock in this table with 60 funds holding shares. On the other hand SK Telecom Co., Ltd. (ADR) (NYSE:SKM) is the least popular one with only 12 bullish hedge fund positions. Laboratory Corp. of America Holdings (NYSE:LH) is not the most popular stock in this group but hedge fund interest is still above average. This is a slightly positive signal but we’d rather spend our time researching stocks that hedge funds are piling on. In this regard FleetCor Technologies, Inc. (NYSE:FLT) might be a better candidate to consider a long position.

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