In this article we will analyze whether Quest Diagnostics Incorporated (NYSE:DGX) is a good investment right now by following the lead of some of the best investors in the world and piggybacking their ideas. There’s no better way to get these firms’ immense resources and analytical capabilities working for us than to follow their lead into their best ideas. While not all of these picks will be winners, our research shows that these picks historically outperformed the market by double digits annually.
Is Quest Diagnostics (DGX) stock a buy or sell? The smart money was getting more optimistic. The number of bullish hedge fund bets went up by 3 lately. Quest Diagnostics Incorporated (NYSE:DGX) was in 45 hedge funds’ portfolios at the end of December. The all time high for this statistic is 46. Our calculations also showed that DGX isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings).
Why do we pay any attention at all to hedge fund sentiment? Our research has shown that a select group of hedge fund holdings outperformed the S&P 500 ETFs by 124 percentage points since March 2017 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 13% through November 17th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. Recently Oregon became the first state to legalize psychedelic mushrooms which are shown to have promising results in treating depression, addiction, and PTSD in early stage academic studies. So, we are checking out this psychedelic drug stock idea right now. We go through lists like the 10 best biotech stocks to invest in to pick the next stock that will deliver a 10x return. 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 homepage (or at the end of this article). Keeping this in mind we’re going to go over the fresh hedge fund action surrounding Quest Diagnostics Incorporated (NYSE:DGX).
Do Hedge Funds Think DGX Is A Good Stock To Buy Now?
Heading into the first quarter of 2021, a total of 45 of the hedge funds tracked by Insider Monkey were long this stock, a change of 7% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards DGX over the last 22 quarters. So, let’s review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Among these funds, Renaissance Technologies held the most valuable stake in Quest Diagnostics Incorporated (NYSE:DGX), which was worth $74.2 million at the end of the fourth quarter. On the second spot was AQR Capital Management which amassed $68.6 million worth of shares. Two Sigma Advisors, Polaris Capital Management, and Millennium 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 Tamarack Capital Management allocated the biggest weight to Quest Diagnostics Incorporated (NYSE:DGX), around 4.13% of its 13F portfolio. Clough Capital Partners is also relatively very bullish on the stock, designating 2.05 percent of its 13F equity portfolio to DGX.
Now, key money managers were breaking ground themselves. Arrowstreet Capital, managed by Peter Rathjens, Bruce Clarke and John Campbell, created the biggest position in Quest Diagnostics Incorporated (NYSE:DGX). Arrowstreet Capital had $30 million invested in the company at the end of the quarter. D. E. Shaw’s D E Shaw also initiated a $11.6 million position during the quarter. The other funds with brand new DGX positions are Nicholas Bagnall’s Te Ahumairangi Investment Management, Paul Marshall and Ian Wace’s Marshall Wace LLP, and Andrew Sandler’s Sandler Capital Management.
Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as Quest Diagnostics Incorporated (NYSE:DGX) but similarly valued. These stocks are Nucor Corporation (NYSE:NUE), KeyCorp (NYSE:KEY), Citrix Systems, Inc. (NASDAQ:CTXS), Seagate Technology plc (NASDAQ:STX), Tiffany & Co. (NYSE:TIF), Varian Medical Systems, Inc. (NYSE:VAR), and BioMarin Pharmaceutical Inc. (NASDAQ:BMRN). This group of stocks’ market caps resemble DGX’s market cap.
|Ticker||No of HFs with positions||Total Value of HF Positions (x1000)||Change in HF Position|
View table here if you experience formatting issues.
As you can see these stocks had an average of 37.9 hedge funds with bullish positions and the average amount invested in these stocks was $1384 million. That figure was $532 million in DGX’s case. BioMarin Pharmaceutical Inc. (NASDAQ:BMRN) is the most popular stock in this table. On the other hand Nucor Corporation (NYSE:NUE) is the least popular one with only 29 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 73.7. 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 30 most popular stocks among hedge funds returned 81.2% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 26 percentage points. These stocks gained 5.3% in 2021 through March 19th and still beat the market by 0.8 percentage points. Hedge funds were also right about betting on DGX as the stock returned 5.6% since the end of Q4 (through 3/19) 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.