Many prominent investors, including Warren Buffett, David Tepper and Stan Druckenmiller, have been cautious regarding the current bull market and missed out as the stock market reached another high in recent weeks. On the other hand, technology hedge funds weren’t timid and registered double digit market beating gains. Financials, energy and industrial stocks aren’t doing great but many of the stocks that delivered strong returns since March are still going very strong and hedge funds actually increased their positions in these stocks. In this article we will find out how hedge fund sentiment to Laboratory Corp. of America Holdings (NYSE:LH) changed recently.
Is LH a good stock to buy now? Laboratory Corp. of America Holdings (NYSE:LH) was in 57 hedge funds’ portfolios at the end of the third quarter of 2020. The all time high for this statistics is 53. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. LH has seen an increase in enthusiasm from smart money lately. There were 52 hedge funds in our database with LH positions at the end of the second quarter. Our calculations also showed that LH isn’t among the 30 most popular stocks among hedge funds (click for Q3 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 a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey’s monthly stock picks returned 113% since March 2017 and outperformed the S&P 500 ETFs by more than 66 percentage points. Our short strategy outperformed the S&P 500 short ETFs by 20 percentage points annually (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, we believe electric vehicles and energy storage are set to become giant markets. Tesla’s stock price skyrocketed, yet lithium prices are still below their 2019 highs. So, we are checking out this lithium stock right now. We go through lists like the 15 best blue chip stocks to buy 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. 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 website. Now let’s check out the latest hedge fund action encompassing Laboratory Corp. of America Holdings (NYSE:LH).
What have hedge funds been doing with Laboratory Corp. of America Holdings (NYSE:LH)?
At third quarter’s end, a total of 57 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 10% from the second quarter of 2020. Below, you can check out the change in hedge fund sentiment towards LH over the last 21 quarters. With the smart money’s capital changing hands, there exists a select group of notable hedge fund managers who were adding to their holdings meaningfully (or already accumulated large positions).
More specifically, Melvin Capital Management was the largest shareholder of Laboratory Corp. of America Holdings (NYSE:LH), with a stake worth $306.5 million reported as of the end of September. Trailing Melvin Capital Management was Iridian Asset Management, which amassed a stake valued at $214.3 million. Glenview Capital, Ariel Investments, and Suvretta Capital Management 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 Iridian Asset Management allocated the biggest weight to Laboratory Corp. of America Holdings (NYSE:LH), around 4.69% of its 13F portfolio. Tamarack Capital Management is also relatively very bullish on the stock, earmarking 4.64 percent of its 13F equity portfolio to LH.
Consequently, specific money managers were breaking ground themselves. Viking Global, managed by Andreas Halvorsen, initiated the most outsized position in Laboratory Corp. of America Holdings (NYSE:LH). Viking Global had $80.9 million invested in the company at the end of the quarter. Zach Schreiber’s Point State Capital also made a $19.9 million investment in the stock during the quarter. The following funds were also among the new LH investors: Sander Gerber’s Hudson Bay Capital Management, Sahm Adrangi’s Kerrisdale Capital, and Renaissance Technologies.
Let’s go over 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 MarketAxess Holdings Inc. (NASDAQ:MKTX), Banco Bilbao Vizcaya Argentaria SA (NYSE:BBVA), Paycom Software Inc (NYSE:PAYC), Teladoc Health, Inc (NYSE:TDOC), Garmin Ltd. (NASDAQ:GRMN), Telefonica S.A. (NYSE:TEF), and EPAM Systems Inc (NYSE:EPAM). This group of stocks’ market valuations are similar to LH’s market valuation.
|Ticker||No of HFs with positions||Total Value of HF Positions (x1000)||Change in HF Position|
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As you can see these stocks had an average of 28.4 hedge funds with bullish positions and the average amount invested in these stocks was $542 million. That figure was $1750 million in LH’s case. Teladoc Health, Inc (NYSE:TDOC) is the most popular stock in this table. On the other hand Telefonica S.A. (NYSE:TEF) is the least popular one with only 5 bullish hedge fund positions. Compared to these stocks Laboratory Corp. of America Holdings (NYSE:LH) is more popular among hedge funds. Our overall hedge fund sentiment score for LH is 90. 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 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10 percentage points. These stocks gained 31.6% in 2020 through December 2nd and still beat the market by 16 percentage points. Unfortunately LH wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on LH were disappointed as the stock returned 5.6% since the end of the third quarter (through 12/2) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2020.
Disclosure: None. This article was originally published at Insider Monkey.