Fiduciary Management Inc. (FMI), an independent money management firm, released its second quarter 2024 investor letter. A copy of the letter can be downloaded here. In the second quarter, global stock markets were mixed, while U.S. large-cap growth stocks continued to march to their beat. The U.S. small-cap stocks were slipping, and international stocks were staying afloat. Economic growth in the U.S. has been resilient, while Europe and Japan have been lackluster. Against this backdrop, the Small Cap Strategy fell about 3.8% (gross) / 4.0% (net), in the quarter compared to a 3.28% and 3.64% decline for the Russell 2000 Index and Russell 2000 Value Index. FMI Large Cap Strategy decreased almost 0.2% (gross) / 0.3% (net) compared with a 4.28% gain and a 2.20% Decline for the S&P 500 and iShares Russell 1000 Value ETF, respectively. The FMI All Cap Equity dropped approximately 0.4% (gross) / 0.6% (net), compared with a 3.12% gain for the iShares Russell 3000 ETF. Finally, the FMI International Strategies declined about 1.4% (gross) / 1.6% (net) on a currency-hedged basis and 2.2% (gross) / 2.4% (net) on a currency-unhedged basis. In addition, please check the fund’s top five holdings to know its best picks in 2024.
Fiduciary Management Inc. highlighted stocks like Quest Diagnostics Incorporated (NYSE:DGX), in the second quarter 2024 investor letter. Quest Diagnostics Incorporated (NYSE:DGX) develops and delivers diagnostic information services. The one-month return of Quest Diagnostics Incorporated (NYSE:DGX) was 5.17%, and its shares gained 3.00% of their value over the last 52 weeks. On July 12, 2024, Quest Diagnostics Incorporated (NYSE:DGX) stock closed at $144.11 per share with a market capitalization of $16.009 billion.
Fiduciary Management Inc stated the following regarding Quest Diagnostics Incorporated (NYSE:DGX) in its Q2 2024 investor letter:
“Quest Diagnostics Incorporated (NYSE:DGX) is one of the largest independent clinical laboratory testing companies in the U.S. with a 24% market share of independent lab testing, and its scale gives it a cost advantage. The clinical testing industry sees steady volume growth, helped by increasing test volume due to an aging population, higher prevalence of chronic disease, and advancements in medical technology that continue to expand the scope of clinical testing. The broader lab industry is an $85 billion market, accounting for only 2% of total healthcare spending, yet influencing over 70% of medical decisions. Today, nearly 60% of diagnostic tests are performed in a hospital or at a hospital outreach laboratory. Importantly, performing the same diagnostic test at an independent lab can cost anywhere between two and five times less than performing the same test in a hospital lab. Quest’s average revenue per requisition is under $50. There is a nationwide focus on increasing preventative healthcare and lowering healthcare costs in general. Independent labs are part of the solution, as there is a huge value to be reaped by pushing more volumes through them. In the past, Quest has seen reimbursement challenges from both government and commercial payors. We believe that reimbursement headwinds have largely abated due to all payors recognizing the large cost-benefit of higher volumes flowing through the independent labs. We expect Quest to generate mid-single-digit topline growth and expand margins, leading to high-single-digit earnings growth. With Quest’s dividend and share repurchases, there are prospects for a low-double-digit total annual return, which is attractive given the defensive nature of the business and well-below market valuation.”
A healthcare specialist providing a risk assessment for a patient.
Quest Diagnostics Incorporated (NYSE:DGX) is not on our list of 31 Most Popular Stocks Among Hedge Funds. As per our database, 36 hedge fund portfolios held Quest Diagnostics Incorporated (NYSE:DGX) at the end of the first quarter which was 32 in the previous quarter. Consolidated revenues of Quest Diagnostics Incorporated (NYSE:DGX) in the first quarter were $2.37 billion, up 1.5% year-over-year. While we acknowledge the potential of Quest Diagnostics Incorporated (NYSE:DGX) as an investment, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is as promising as NVIDIA but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
In addition, please check out our hedge fund investor letters Q2 2024 page for more investor letters from hedge funds and other leading investors.
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Disclosure: None. This article is originally published at Insider Monkey.
