It seems that the masses and most of the financial media hate hedge funds and what they do, but why is this hatred of hedge funds so prominent? At the end of the day, these asset management firms do not gamble the hard-earned money of the people who are on the edge of poverty. Truth be told, most hedge fund managers and other smaller players within this industry are very smart and skilled investors. Of course, they may also make wrong bets in some instances, but no one knows what the future holds and how market participants will react to the bountiful news that floods in each day. The Standard and Poor’s 500 Index returned approximately 20% in the first 9 months of this year (through September 30th). Conversely, hedge funds’ top 20 large-cap stock picks generated a return of 24% during the same 9-month period, with the majority of these stock picks outperforming the broader market benchmark. Coincidence? It might happen to be so, but it is unlikely. Our research covering the last 18 years indicates that hedge funds’ consensus stock picks generate superior risk-adjusted returns. That’s why we believe it isn’t a waste of time to check out hedge fund sentiment before you invest in a stock like LHC Group, Inc. (NASDAQ:LHCG).
Is LHC Group, Inc. (NASDAQ:LHCG) a bargain? The best stock pickers are turning bullish. The number of long hedge fund bets moved up by 3 recently. Our calculations also showed that LHCG isn’t among the 30 most popular stocks among hedge funds (view the video below). LHCG was in 26 hedge funds’ portfolios at the end of the second quarter of 2019. There were 23 hedge funds in our database with LHCG holdings at the end of the previous quarter.
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
To most market participants, hedge funds are seen as slow, old financial vehicles of the past. While there are more than 8000 funds trading at the moment, Our experts look at the elite of this group, around 750 funds. Most estimates calculate that this group of people preside over the majority of the smart money’s total asset base, and by observing their matchless investments, Insider Monkey has discovered a few investment strategies that have historically defeated Mr. Market. Insider Monkey’s flagship hedge fund strategy defeated the S&P 500 index by around 5 percentage points annually since its inception in May 2014. We were able to generate large returns even by identifying short candidates. Our portfolio of short stocks lost 25.7% since February 2017 (through September 30th) even though the market was up more than 33% during the same period. We just shared a list of 10 short targets in our latest quarterly update .
Unlike former hedge manager, Dr. Steve Sjuggerud, who is convinced Dow will soar past 40000, our long-short investment strategy doesn’t rely on bull markets to deliver double digit returns. We only rely on hedge fund buy/sell signals. Let’s analyze the fresh hedge fund action encompassing LHC Group, Inc. (NASDAQ:LHCG).
How are hedge funds trading LHC Group, Inc. (NASDAQ:LHCG)?
At Q2’s end, a total of 26 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 13% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards LHCG over the last 16 quarters. With hedge funds’ capital changing hands, there exists a select group of noteworthy hedge fund managers who were upping their stakes substantially (or already accumulated large positions).
Among these funds, Governors Lane held the most valuable stake in LHC Group, Inc. (NASDAQ:LHCG), which was worth $11.4 million at the end of the second quarter. On the second spot was Arrowgrass Capital Partners which amassed $11.3 million worth of shares. Moreover, BlueCrest Capital Mgmt., Highbridge Capital Management, and Marshall Wace LLP were also bullish on LHC Group, Inc. (NASDAQ:LHCG), allocating a large percentage of their portfolios to this stock.
Now, key money managers have been driving this bullishness. BlueCrest Capital Mgmt., managed by Michael Platt and William Reeves, created the most outsized position in LHC Group, Inc. (NASDAQ:LHCG). BlueCrest Capital Mgmt. had $10 million invested in the company at the end of the quarter. Glenn Russell Dubin’s Highbridge Capital Management also initiated a $8.4 million position during the quarter. The other funds with new positions in the stock are Paul Marshall and Ian Wace’s Marshall Wace LLP, Jeffrey Tannenbaum’s Fir Tree, and Steve Pigott’s Fort Baker Capital Management.
Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as LHC Group, Inc. (NASDAQ:LHCG) but similarly valued. We will take a look at frontdoor, inc. (NASDAQ:FTDR), Texas Roadhouse Inc (NASDAQ:TXRH), Axon Enterprise, Inc. (NASDAQ:AAXN), and Globant SA (NYSE:GLOB). All of these stocks’ market caps match LHCG’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| FTDR | 40 | 739174 | 6 |
| TXRH | 23 | 257119 | -2 |
| AAXN | 16 | 250261 | -3 |
| GLOB | 14 | 63286 | -6 |
| Average | 23.25 | 327460 | -1.25 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 23.25 hedge funds with bullish positions and the average amount invested in these stocks was $327 million. That figure was $108 million in LHCG’s case. frontdoor, inc. (NASDAQ:FTDR) is the most popular stock in this table. On the other hand Globant SA (NYSE:GLOB) is the least popular one with only 14 bullish hedge fund positions. LHC Group, Inc. (NASDAQ:LHCG) 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. Our calculations showed that top 20 most popular stocks among hedge funds returned 24.4% in 2019 through September 30th and outperformed the S&P 500 ETF (SPY) by 4 percentage points. Unfortunately LHCG wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on LHCG were disappointed as the stock returned -5% during the third quarter and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as many of these stocks already outperformed the market so far this year.
Disclosure: None. This article was originally published at Insider Monkey.
