It was a rough fourth quarter for many hedge funds, which were naturally unable to overcome the big dip in the broad market, as the S&P 500 fell by about 4.8% during 2018 and average hedge fund losing about 1%. The Russell 2000, composed of smaller companies, performed even worse, trailing the S&P by more than 6 percentage points, as investors fled less-known quantities for safe havens. This was the case with hedge funds, who we heard were pulling money from the market amid the volatility, which included money from small-cap stocks, which they invest in at a higher rate than other investors. This action contributed to the greater decline in these stocks during the tumultuous period. We will study how this market volatility affected their sentiment towards LHC Group, Inc. (NASDAQ:LHCG) during the quarter below.
LHC Group, Inc. (NASDAQ:LHCG) investors should be aware of an increase in support from the world’s most elite money managers of late. Our calculations also showed that LHCG isn’t among the 30 most popular stocks among hedge funds.
In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey’s flagship best performing hedge funds strategy returned 20.7% year to date (through March 12th) and outperformed the market even though it draws its stock picks among small-cap stocks. This strategy also outperformed the market by 32 percentage points since its inception (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
We’re going to take a look at the new hedge fund action encompassing LHC Group, Inc. (NASDAQ:LHCG).
Hedge fund activity in LHC Group, Inc. (NASDAQ:LHCG)
At the end of the fourth quarter, a total of 27 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 8% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in LHCG over the last 14 quarters. With hedge funds’ positions undergoing their usual ebb and flow, there exists an “upper tier” of key hedge fund managers who were boosting their stakes meaningfully (or already accumulated large positions).
According to Insider Monkey’s hedge fund database, Brian Ashford-Russell and Tim Woolley’s Polar Capital has the biggest position in LHC Group, Inc. (NASDAQ:LHCG), worth close to $19.5 million, corresponding to 0.2% of its total 13F portfolio. On Polar Capital’s heels is Isaac Corre of Governors Lane, with a $14.6 million position; the fund has 1.4% of its 13F portfolio invested in the stock. Other professional money managers that hold long positions comprise Nick Niell’s Arrowgrass Capital Partners, John M. Angelo and Michael L. Gordon’s Angelo Gordon & Co and Steve Cohen’s Point72 Asset Management.
As aggregate interest increased, key money managers were breaking ground themselves. Point72 Asset Management, managed by Steve Cohen, established the biggest position in LHC Group, Inc. (NASDAQ:LHCG). Point72 Asset Management had $7.6 million invested in the company at the end of the quarter. Mariko Gordon’s Daruma Asset Management also made a $2.5 million investment in the stock during the quarter. The other funds with brand new LHCG positions are Joel Greenblatt’s Gotham Asset Management, D. E. Shaw’s D E Shaw, and Matthew Hulsizer’s PEAK6 Capital Management.
Let’s now take a look at hedge fund activity in other stocks similar to LHC Group, Inc. (NASDAQ:LHCG). We will take a look at Valley National Bancorp (NASDAQ:VLY), Qualys Inc (NASDAQ:QLYS), Sabra Health Care REIT Inc (NASDAQ:SBRA), and Newfield Exploration Co. (NYSE:NFX). This group of stocks’ market values match LHCG’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| VLY | 8 | 14064 | 0 |
| QLYS | 17 | 180037 | -1 |
| SBRA | 15 | 82224 | 6 |
| NFX | 34 | 330966 | -5 |
| Average | 18.5 | 151823 | 0 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 18.5 hedge funds with bullish positions and the average amount invested in these stocks was $152 million. That figure was $112 million in LHCG’s case. Newfield Exploration Co. (NYSE:NFX) is the most popular stock in this table. On the other hand Valley National Bancorp (NASDAQ:VLY) is the least popular one with only 8 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 15 most popular stocks) among hedge funds returned 24.2% through April 22nd and outperformed the S&P 500 ETF (SPY) by more than 7 percentage points. Unfortunately LHCG wasn’t nearly as popular as these 15 stock and hedge funds that were betting on LHCG were disappointed as the stock returned 6.7% and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 15 most popular stocks) among hedge funds as 13 of these stocks already outperformed the market this year.
Disclosure: None. This article was originally published at Insider Monkey.
