Should You Buy LHC Group, Inc. (LHCG)?

Hedge fund managers like David Einhorn, Dan Loeb, or Carl Icahn became billionaires through reaping large profits for their investors, which is why piggybacking their stock picks may provide us with significant returns as well. Many hedge funds, like Paul Singer’s Elliott Management, are pretty secretive, but we can still get some insights by analyzing their quarterly 13F filings. One of the most fertile grounds for large abnormal returns is hedge funds’ most popular small-cap picks, which are not so widely followed and often trade at a discount to their intrinsic value. In this article we will check out hedge fund activity in another small-cap stock: LHC Group, Inc. (NASDAQ:LHCG).

LHC Group, Inc. (NASDAQ:LHCG) was in 19 hedge funds’ portfolios at the end of September. LHCG shareholders have witnessed an increase in hedge fund sentiment recently. There were 17 hedge funds in our database with LHCG holdings at the end of the previous quarter. At the end of this article we will also compare LHCG to other stocks including ePlus Inc. (NASDAQ:PLUS), Easterly Government Properties Inc (NYSE:DEA), and Enviva Partners LP (NYSE:EVA) to get a better sense of its popularity.

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.

Hedge fund activity in LHC Group, Inc. (NASDAQ:LHCG)

At Q3’s end, a total of 19 of the hedge funds tracked by Insider Monkey were bullish on this stock, an increase of 12% from the previous quarter. The graph below displays the number of hedge funds with bullish position in LHCG over the last 5 quarters. So, let’s find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Of the funds tracked by Insider Monkey, Christopher Shackelton and Adam Gray of Coliseum Capital holds the largest position in LHC Group, Inc. (NASDAQ:LHCG). Coliseum Capital has a $34 million position in the stock, comprising 11.9% of its 13F portfolio. The second most bullish fund manager is James Dondero’s Highland Capital Management holding a $6.6 million position. Other members of the smart money that hold long positions comprise Jim Simons’ Renaissance Technologies, Israel Englander’s Millennium Management and Cliff Asness’ AQR Capital Management. We should note that none of these hedge funds are among our list of the 100 best performing hedge funds which is based on the performance of their 13F long positions in non-microcap stocks.

As industrywide interest jumped, specific money managers were leading the bulls’ herd. Iguana Healthcare Management, led by Stuart Weisbrod, created the biggest position in LHC Group, Inc. (NASDAQ:LHCG). Iguana Healthcare Management had $2.4 million invested in the company at the end of the quarter. Ken Griffin’s Citadel Investment Group also made a $0.4 million investment in the stock during the quarter. The other funds with new positions in the stock are Gavin Saitowitz and Cisco J. del Valle’s Springbok Capital, Paul Tudor Jones’ Tudor Investment Corp, and Joseph Edelman’s Perceptive Advisors.

Let’s go over hedge fund activity in other stocks similar to LHC Group, Inc. (NASDAQ:LHCG). These stocks are ePlus Inc. (NASDAQ:PLUS), Easterly Government Properties Inc (NYSE:DEA), Enviva Partners LP (NYSE:EVA), and The Gorman-Rupp Company (NYSEAMEX:GRC). This group of stocks’ market caps are similar to LHCG’s market cap.

As you can see these stocks had an average of 6 hedge funds with bullish positions and the average amount invested in these stocks was $30 million. That figure was $72 million in LHCG’s case. ePlus Inc. (NASDAQ:PLUS) is the most popular stock in this table. On the other hand Enviva Partners LP (NYSE:EVA) is the least popular one with only 2 bullish hedge fund positions. Compared to these stocks LHC Group, Inc. (NASDAQ:LHCG) is more popular among hedge funds. Considering that hedge funds are fond of this stock in relation to its market cap peers, it may be a good idea to analyze it in detail and potentially include it in your portfolio.

Disclosure: None