Laboratory Corp. of America Holdings (LH): Are Hedge Funds Right About This Stock?

A whopping number of 13F filings filed with U.S. Securities and Exchange Commission has been processed by Insider Monkey so that individual investors can look at the overall hedge fund sentiment towards the stocks included in their watchlists. These freshly-submitted public filings disclose money managers’ equity positions as of the end of the three-month period that ended September 30th, so let’s proceed with the discussion of the hedge fund sentiment on Laboratory Corp. of America Holdings (NYSE:LH).

Is Laboratory Corp. of America Holdings (NYSE:LH) a bargain? Hedge funds were turning bullish. The number of bullish hedge fund bets advanced by 5 in recent months. Laboratory Corp. of America Holdings (NYSE:LH) was in 58 hedge funds’ portfolios at the end of the third quarter of 2021. The all time high for this statistic is 66. Our calculations also showed that LH isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings). There were 53 hedge funds in our database with LH positions at the end of the second quarter.

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium prices have more than doubled over the past year, so we go through lists like the 10 best EV stocks to pick the next Tesla 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. With all of this in mind we’re going to view the recent hedge fund action encompassing Laboratory Corp. of America Holdings (NYSE:LH).

Kamran Moghtaderi of Tudor Investment Corp

Do Hedge Funds Think LH Is A Good Stock To Buy Now?

At Q3’s end, a total of 58 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 9% from the previous quarter. On the other hand, there were a total of 57 hedge funds with a bullish position in LH a year ago. With the smart money’s positions undergoing their usual ebb and flow, there exists an “upper tier” of key hedge fund managers who were increasing their stakes significantly (or already accumulated large positions).

Among these funds, Melvin Capital Management held the most valuable stake in Laboratory Corp. of America Holdings (NYSE:LH), which was worth $534.7 million at the end of the third quarter. On the second spot was Millennium Management which amassed $274.3 million worth of shares. Viking Global, Ariel Investments, and Citadel Investment Group 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 JANA Partners allocated the biggest weight to Laboratory Corp. of America Holdings (NYSE:LH), around 8.68% of its 13F portfolio. Wallace R. Weitz & Co. is also relatively very bullish on the stock, designating 4.25 percent of its 13F equity portfolio to LH.

As aggregate interest increased, key money managers were breaking ground themselves. Eminence Capital, managed by Ricky Sandler, established the largest position in Laboratory Corp. of America Holdings (NYSE:LH). Eminence Capital had $100.2 million invested in the company at the end of the quarter. Farallon Capital also initiated a $100.2 million position during the quarter. The following funds were also among the new LH investors: Kamran Moghtaderi’s Eversept Partners, Paul Tudor Jones’s Tudor Investment Corp, and Qing Li’s Sciencast Management.

Let’s also examine hedge fund activity in other stocks similar to Laboratory Corp. of America Holdings (NYSE:LH). These stocks are UiPath Inc. (NYSE:PATH), AppLovin Corporation (NASDAQ:APP), Weyerhaeuser Co. (NYSE:WY), Telefonica S.A. (NYSE:TEF), Wayfair Inc (NYSE:W), Carnival Corporation & plc (NYSE:CUK), and Arista Networks Inc (NYSE:ANET). This group of stocks’ market valuations match LH’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
PATH 27 3629284 27
APP 24 1115983 24
WY 28 211817 -11
TEF 5 12431 1
W 31 3246491 -4
CUK 9 239633 -1
ANET 32 487538 -3
Average 22.3 1277597 4.7

View table here if you experience formatting issues.

As you can see these stocks had an average of 22.3 hedge funds with bullish positions and the average amount invested in these stocks was $1278 million. That figure was $2706 million in LH’s case. Arista Networks Inc (NYSE:ANET) 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 86.4. 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 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 28.6% in 2021 through November 30th and still beat the market by 5.6 percentage points. Unfortunately LH wasn’t nearly as popular as these 5 stocks and hedge funds that were betting on LH were disappointed as the stock returned 1.4% since the end of the third quarter (through 11/30) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as most of these stocks already outperformed the market since 2019.

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