Is LifePoint Hospitals, Inc. (LPNT) A Good Stock To Buy?

Looking for high-potential stocks? Just follow the big players within the hedge fund industry. Why should you do so? Let’s take a brief look at what statistics have to say about hedge funds’ stock picking abilities to illustrate. The Standard and Poor’s 500 Index returned approximately 5.2% in the 12 months ending October 30, with more than 51% of the stocks in the index failing to beat the benchmark. Therefore, the odds that one will pin down a winner by randomly picking a stock are less than the odds in a fair coin-tossing game. Conversely, hedge funds’ 30 preferred S&P 500 stocks (as of September 2014) generated a return of 9.5% during the same 12-month period, with 63% of these stock picks outperformed the broader market benchmark. Coincidence? It might happen to be so, but it is unlikely. Our research covering a 16-year period indicates that hedge funds’ stock picks generate superior risk-adjusted returns. That’s why we believe it is wise to check hedge fund activity before you invest your time or your savings on a stock like LifePoint Hospitals, Inc. (NASDAQ:LPNT).

LifePoint Hospitals, Inc. has experienced a slight increase in enthusiasm from smart money lately. LPNT was in 26 hedge funds’ portfolios at the end of the third quarter of 2015. There were 25 hedge funds in our database with LPNT positions at the end of the previous quarter. 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 Genesee & Wyoming Inc (NYSE:GWR), SLM Corp (NASDAQ:SLM), and Equity One, Inc. (NYSE:EQY) to gather more data points.

According to most market participants, hedge funds are assumed to be unimportant, old investment vehicles of yesteryear. While there are over 8000 funds with their doors open at the moment, Our researchers choose to focus on the top tier of this group, around 700 funds. Most estimates calculate that this group of people direct bulk of the hedge fund industry’s total capital, and by watching their unrivaled equity investments, Insider Monkey has uncovered several investment strategies that have historically outrun the broader indices. Insider Monkey’s small-cap hedge fund strategy outstripped the S&P 500 index by 12 percentage points per annum for a decade in their back tests.

Keeping this in mind, let’s take a glance at the key action regarding LifePoint Hospitals, Inc. (NASDAQ:LPNT).

How have hedgies been trading LifePoint Hospitals, Inc. (NASDAQ:LPNT)?

At the Q3’s end, a total of 26 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 4% from the second quarter. With hedgies’ capital changing hands, there exists a few notable hedge fund managers who were upping their holdings significantly (or already accumulated large positions).

According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Gotham Asset Management, managed by Joel Greenblatt, holds the biggest position in LifePoint Hospitals, Inc. (NASDAQ:LPNT). Gotham Asset Management has a $54 million position in the stock, comprising 0.5% of its 13F portfolio. On Gotham Asset Management’s heels is Arrowstreet Capital, managed by Peter Rathjens, Bruce Clarke and John Campbell, which holds a $37 million position; 0.2% of its 13F portfolio is allocated to the company. Other hedge funds and institutional investors that hold long positions consist of Anders Hallberg and Carl Bennet’s HealthInvest Partners AB, Clifford Fox’s Columbus Circle Investors and Cliff Asness’s AQR Capital Management.

As one would reasonably expect, some big names were breaking ground themselves. Algert Coldiron Investors, managed by Peter Algert and Kevin Coldiron, created the most valuable position in LifePoint Hospitals, Inc. (NASDAQ:LPNT). Algert Coldiron Investors had $1.5 million invested in the company at the end of the quarter. Jacob Gottlieb’s Visium Asset Management also made a $1.4 million investment in the stock during the quarter. The other funds with new positions in the stock are Matthew Tewksbury’s Stevens Capital Management, Ray Dalio’s Bridgewater Associates, and Joe DiMenna’s ZWEIG DIMENNA PARTNERS.

Let’s check out hedge fund activity in other stocks similar to LifePoint Hospitals, Inc. (NASDAQ:LPNT). We will take a look at Genesee & Wyoming Inc (NYSE:GWR), SLM Corp (NASDAQ:SLM), Equity One, Inc. (NYSE:EQY), and Western Alliance Bancorporation (NYSE:WAL). This group of stocks’ market values match LPNT’s market value.

As you can see these stocks had an average of 21 hedge funds with bullish positions and the average amount invested in these stocks was $221 million, slightly lower than the $275 million in stock that hedge funds held invested in LPNT. Western Alliance Bancorporation (NYSE:WAL) is the most popular stock in this table, while Equity One, Inc. (NYSE:EQY) is the least popular one with only 17 bullish hedge fund positions. LifePoint Hospitals, Inc. (NASDAQ:LPNT) 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 WAL might be a better candidate to consider a long position.