Laboratory Corp. of America Holdings (LH): Insiders Aren’t Crazy About It

Laboratory Corp. of America Holdings (NYSE:LH) has experienced an increase in support from the world’s most elite money managers in recent months.

According to most shareholders, hedge funds are viewed as underperforming, old financial tools of the past. While there are over 8000 funds with their doors open today, we look at the masters of this group, around 450 funds. It is estimated that this group controls most of all hedge funds’ total asset base, and by paying attention to their best investments, we have come up with a number of investment strategies that have historically outstripped the market. Our small-cap hedge fund strategy outstripped the S&P 500 index by 18 percentage points annually for a decade in our back tests, and since we’ve began to sharing our picks with our subscribers at the end of August 2012, we have outpaced the S&P 500 index by 23.3 percentage points in 8 months (see the details here).

Just as integral, optimistic insider trading activity is a second way to parse down the financial markets. Just as you’d expect, there are a variety of motivations for a bullish insider to cut shares of his or her company, but only one, very simple reason why they would behave bullishly. Various empirical studies have demonstrated the useful potential of this method if investors understand what to do (learn more here).

Keeping this in mind, we’re going to take a gander at the recent action regarding Laboratory Corp. of America Holdings (NYSE:LH).

Hedge fund activity in Laboratory Corp. of America Holdings (NYSE:LH)

At Q1’s end, a total of 25 of the hedge funds we track were long in this stock, a change of 9% from one quarter earlier. With hedge funds’ capital changing hands, there exists an “upper tier” of notable hedge fund managers who were increasing their holdings considerably.

Of the funds we track, Pzena Investment Management, managed by Richard S. Pzena, holds the largest position in Laboratory Corp. of America Holdings (NYSE:LH). Pzena Investment Management has a $208.1 million position in the stock, comprising 1.5% of its 13F portfolio. Sitting at the No. 2 spot is Chieftain Capital, managed by John Shapiro, which held a $131.2 million position; 9.3% of its 13F portfolio is allocated to the company. Some other hedgies with similar optimism include David Blood and Al Gore’s Generation Investment Management, Michael A. Price and Amos Meron’s Empyrean Capital Partners and Wallace Weitz’s Wallace R. Weitz & Co..

As industrywide interest jumped, key hedge funds have been driving this bullishness. Generation Investment Management, managed by David Blood and Al Gore, created the most valuable position in Laboratory Corp. of America Holdings (NYSE:LH). Generation Investment Management had 108.6 million invested in the company at the end of the quarter. Stephen DuBois’s Camber Capital Management also made a $18 million investment in the stock during the quarter. The following funds were also among the new LH investors: Jim Simons’s Renaissance Technologies, Matthew Tewksbury’s Stevens Capital Management, and Israel Englander’s Millennium Management.

What have insiders been doing with Laboratory Corp. of America Holdings (NYSE:LH)?

Insider trading activity, especially when it’s bullish, is particularly usable when the primary stock in question has experienced transactions within the past half-year. Over the latest six-month time frame, Laboratory Corp. of America Holdings (NYSE:LH) has experienced zero unique insiders purchasing, and 6 insider sales (see the details of insider trades here).

Let’s check out hedge fund and insider activity in other stocks similar to Laboratory Corp. of America Holdings (NYSE:LH). These stocks are Covance Inc. (NYSE:CVD), Agilent Technologies Inc. (NYSE:A), Life Technologies Corp. (NASDAQ:LIFE), Mettler-Toledo International Inc. (NYSE:MTD), and Quest Diagnostics Inc (NYSE:DGX). This group of stocks are in the medical laboratories & research industry and their market caps are closest to LH’s market cap.

With the results demonstrated by our studies, everyday investors must always watch hedge fund and insider trading activity, and Laboratory Corp. of America Holdings (NYSE:LH) applies perfectly to this mantra.

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