We know that hedge funds generate strong, risk-adjusted returns over the long run, which is why imitating the picks that they are collectively bullish on can be a profitable strategy for retail investors. With billions of dollars in assets, professional investors have to conduct complex analyses, spend many resources and use tools that are not always available for the general crowd. This doesn't mean that they don't have occasional colossal losses; they do. However, it is still a good idea to keep an eye on hedge fund activity. With this in mind, let’s examine the smart money sentiment towards Laboratory Corp. of America Holdings (NYSE:LH) and determine whether hedge funds skillfully traded this stock.
Laboratory Corp. of America Holdings (NYSE:LH) was in 52 hedge funds' portfolios at the end of the second quarter of 2020. LH shareholders have witnessed an increase in enthusiasm from smart money of late. There were 45 hedge funds in our database with LH holdings at the end of March. Our calculations also showed that LH isn't among the 30 most popular stocks among hedge funds (click for Q2 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.
According to most traders, hedge funds are perceived as worthless, old financial tools of the past. While there are over 8000 funds trading at the moment, Our experts look at the masters of this group, about 850 funds. These investment experts oversee the lion's share of the smart money's total capital, and by tracking their best stock picks, Insider Monkey has found several investment strategies that have historically outperformed Mr. Market. Insider Monkey's flagship short hedge fund strategy surpassed the S&P 500 short ETFs by around 20 percentage points annually since its inception in March 2017. Our portfolio of short stocks lost 34% since February 2017 (through August 17th) even though the market was up 53% during the same period. We just shared a list of 8 short targets in our latest quarterly update .
John Rogers Ariel Investments
John Rogers of Ariel Investments
At Insider Monkey we scour multiple sources to uncover the next great investment idea. Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost precious metals prices. So, we are checking out this junior gold mining stock.. We go through lists like the 10 most profitable companies in America 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. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. Keeping this in mind we're going to view the latest hedge fund action encompassing Laboratory Corp. of America Holdings (NYSE:LH).
How have hedgies been trading Laboratory Corp. of America Holdings (NYSE:LH)?
At the end of the second quarter, a total of 52 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 16% from the previous quarter. On the other hand, there were a total of 38 hedge funds with a bullish position in LH a year ago. With hedgies' positions undergoing their usual ebb and flow, there exists a select group of key hedge fund managers who were adding to their stakes considerably (or already accumulated large positions).
According to Insider Monkey's hedge fund database, Iridian Asset Management, managed by David Cohen and Harold Levy, holds the most valuable position in Laboratory Corp. of America Holdings (NYSE:LH). Iridian Asset Management has a $200.8 million position in the stock, comprising 4.4% of its 13F portfolio. Sitting at the No. 2 spot is Melvin Capital Management, managed by Gabriel Plotkin, which holds a $166.1 million position; the fund has 1% of its 13F portfolio invested in the stock. Other professional money managers with similar optimism encompass Ken Griffin's Citadel Investment Group, John W. Rogers's Ariel Investments and Larry Robbins's Glenview Capital. In terms of the portfolio weights assigned to each position Bridger Management allocated the biggest weight to Laboratory Corp. of America Holdings (NYSE:LH), around 5.05% of its 13F portfolio. Iridian Asset Management is also relatively very bullish on the stock, setting aside 4.43 percent of its 13F equity portfolio to LH.
As industrywide interest jumped, some big names have jumped into Laboratory Corp. of America Holdings (NYSE:LH) headfirst. Glenview Capital, managed by Larry Robbins, initiated the most outsized position in Laboratory Corp. of America Holdings (NYSE:LH). Glenview Capital had $121.9 million invested in the company at the end of the quarter. Steve Cohen's Point72 Asset Management also made a $95.2 million investment in the stock during the quarter. The other funds with brand new LH positions are Aaron Cowen's Suvretta Capital Management, Christopher James's Partner Fund Management, and Ricky Sandler's Eminence Capital.
Let's go over hedge fund activity in other stocks similar to Laboratory Corp. of America Holdings (NYSE:LH). We will take a look at Amcor plc (NYSE:AMCR), Pioneer Natural Resources Company (NYSE:PXD), Bilibili Inc. (NASDAQ:BILI), Hess Corporation (NYSE:HES), Take-Two Interactive Software, Inc. (NASDAQ:TTWO), Arista Networks Inc (NYSE:ANET), and Baker Hughes Company (NYSE:BKR). This group of stocks' market caps are closest to LH's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position AMCR,16,201571,-3 PXD,35,341030,-5 BILI,29,1375236,5 HES,28,335349,0 TTWO,61,1412613,-5 ANET,33,510414,9 BKR,27,403640,-3 Average,32.7,654265,-0.3 [/table]
As you can see these stocks had an average of 32.7 hedge funds with bullish positions and the average amount invested in these stocks was $654 million. That figure was $1580 million in LH's case. Take-Two Interactive Software, Inc. (NASDAQ:TTWO) is the most popular stock in this table. On the other hand Amcor plc (NYSE:AMCR) is the least popular one with only 16 bullish hedge fund positions. Laboratory Corp. of America Holdings (NYSE:LH) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for LH is 80. 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. This is a slightly positive signal but we'd rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 33% in 2020 through the end of August and beat the market by 23.2 percentage points. Unfortunately LH wasn't nearly as popular as these 10 stocks and hedge funds that were betting on LH were disappointed as the stock returned 5.8% during the same time period and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 10 most popular stocks among hedge funds as many of these stocks already outperformed the market so far this year.
