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 March 31, 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) undervalued? The best stock pickers are getting more optimistic. The number of bullish hedge fund positions advanced by 1 recently. Our calculations also showed that LH isn’t among the 30 most popular stocks among hedge funds. LH was in 39 hedge funds’ portfolios at the end of March. There were 38 hedge funds in our database with LH positions at the end of the previous quarter.
Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. Our research has shown that hedge funds’ small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the market by 40 percentage points since May 2014 through May 30, 2019 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter.
Let’s take a glance at the key hedge fund action regarding Laboratory Corp. of America Holdings (NYSE:LH).
Hedge fund activity in Laboratory Corp. of America Holdings (NYSE:LH)
At the end of the first quarter, a total of 39 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 3% from the fourth quarter of 2018. The graph below displays the number of hedge funds with bullish position in LH over the last 15 quarters. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
More specifically, AQR Capital Management was the largest shareholder of Laboratory Corp. of America Holdings (NYSE:LH), with a stake worth $193.6 million reported as of the end of March. Trailing AQR Capital Management was Ariel Investments, which amassed a stake valued at $142.6 million. Millennium Management, Citadel Investment Group, and Point72 Asset Management were also very fond of the stock, giving the stock large weights in their portfolios.
As one would reasonably expect, specific money managers were breaking ground themselves. Point72 Asset Management, managed by Steve Cohen, assembled the most outsized position in Laboratory Corp. of America Holdings (NYSE:LH). Point72 Asset Management had $103.7 million invested in the company at the end of the quarter. Roberto Mignone’s Bridger Management also made a $50.6 million investment in the stock during the quarter. The other funds with brand new LH positions are Brandon Haley’s Holocene Advisors, Jeffrey Talpins’s Element Capital Management, and Vishal Saluja and Pham Quang’s Endurant Capital Management.
Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as Laboratory Corp. of America Holdings (NYSE:LH) but similarly valued. We will take a look at Darden Restaurants, Inc. (NYSE:DRI), Citizens Financial Group Inc (NYSE:CFG), HCP, Inc. (NYSE:HCP), and Loews Corporation (NYSE:L). This group of stocks’ market values resemble LH’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| DRI | 38 | 1016976 | 1 |
| CFG | 41 | 1207295 | -2 |
| HCP | 26 | 661094 | -2 |
| L | 20 | 235814 | -1 |
| Average | 31.25 | 780295 | -1 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 31.25 hedge funds with bullish positions and the average amount invested in these stocks was $780 million. That figure was $1199 million in LH’s case. Citizens Financial Group Inc (NYSE:CFG) is the most popular stock in this table. On the other hand Loews Corporation (NYSE:L) is the least popular one with only 20 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 calculations showed that top 20 most popular stocks among hedge funds returned 1.9% in Q2 through May 30th and outperformed the S&P 500 ETF (SPY) by more than 3 percentage points. Hedge funds were also right about betting on LH as the stock returned 6.8% during the same period and outperformed the market by an even larger margin. Hedge funds were rewarded for their relative bullishness.
Disclosure: None. This article was originally published at Insider Monkey.
