Is Quest Diagnostics Inc (DGX) Going to Burn These Hedge Funds?

Is Quest Diagnostics Inc (NYSE:DGX) going to burn these hedge funds?

To many of your fellow readers, hedge funds are assumed to be overrated, outdated investment tools of an era lost to time. Although there are more than 8,000 hedge funds in operation today, Insider Monkey aim at the bigwigs of this group, around 525 funds. It is widely held that this group oversees most of the hedge fund industry’s total assets, and by keeping an eye on their best stock picks, we’ve identified a few investment strategies that have historically outpaced the broader indices. Our small-cap hedge fund strategy outpaced the S&P 500 index by 18 percentage points per annum for a decade in our back tests, and since we’ve started sharing our picks with our subscribers at the end of August 2012, we have beaten the S&P 500 index by 33 percentage points in 11 months (find a sample of our picks).

Equally as necessary, optimistic insider trading sentiment is another way to look at the financial markets. There are a number of motivations for a bullish insider to get rid of shares of his or her company, but only one, very simple reason why they would behave bullishly. Plenty of academic studies have demonstrated the useful potential of this strategy if investors know where to look (learn more here).

Furthermore, we’re going to analyze the latest info about Quest Diagnostics Inc (NYSE:DGX).

How are hedge funds trading Quest Diagnostics Inc (NYSE:DGX)?

At Q2’s end, a total of 33 of the hedge funds we track held long positions in this stock, a change of 3% from the previous quarter. With hedge funds’ sentiment swirling, there exists an “upper tier” of noteworthy hedge fund managers who were boosting their stakes considerably.

When using filings from the hedgies we track, Natixis Global Asset Management’s Harris Associates had the most valuable position in Quest Diagnostics Inc (NYSE:DGX), worth close to $259.2 million, comprising 0.5% of its total 13F portfolio. On Harris Associates’s heels is Ralph V. Whitworth of Relational Investors, with a $250.3 million position; 4.7% of its 13F portfolio is allocated to the company. Remaining hedge funds that are bullish include Ric Dillon’s Diamond Hill Capital, Ricky Sandler’s Eminence Capital and Bernard Horn’s Polaris Capital Management.

As industrywide interest increased, specific money managers were breaking ground themselves. Relational Investors, managed by Ralph V. Whitworth, established the biggest position in Quest Diagnostics Inc (NYSE:DGX). Relational Investors had 250.3 million invested in the company at the end of the quarter. Ric Dillon’s Diamond Hill Capital also made a $114.9 million investment in the stock during the quarter. The other funds with new positions in the stock are Ricky Sandler’s Eminence Capital, Bernard Horn’s Polaris Capital Management, and Stephen DuBois’s Camber Capital Management.

How are insiders trading Quest Diagnostics Inc (NYSE:DGX)?

Insider buying made by high-level executives is particularly usable when the company in question has seen transactions within the past six months. Over the latest half-year time frame, Quest Diagnostics Inc (NYSE:DGX) has seen zero unique insiders buying, and zero insider sales (see the details of insider trades here).

We’ll go over the relationship between both of these indicators in other stocks similar to Quest Diagnostics Inc (NYSE:DGX). These stocks are Covance Inc. (NYSE:CVD), Agilent Technologies Inc. (NYSE:A), Mettler-Toledo International Inc. (NYSE:MTD), Life Technologies Corp. (NASDAQ:LIFE), and Laboratory Corp. of America Holdings (NYSE:LH). This group of stocks belong to the medical laboratories & research industry and their market caps match DGX’s market cap.

Using the returns shown by Insider Monkey’s strategies, regular investors must always keep one eye on hedge fund and insider trading activity, and Quest Diagnostics Inc (NYSE:DGX) is an important part of this process.

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