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How Did LHC Group, Inc. (LHCG) Compare Against Hedge Fund Darlings in 2019?

Reymerlyn Martin

While the market driven by short-term sentiment influenced by the accomodative interest rate environment in the US, increasing oil prices and deteriorating expectations towards the resolution of the trade war with China, many smart money investors kept their cautious approach regarding the current bull run in the third quarter and hedging or reducing many of their long positions. Some fund managers are betting on Dow hitting 40,000 to generate strong returns. However, as we know, big investors usually buy stocks with strong fundamentals that can deliver gains both in bull and bear markets, which is why we believe we can profit from imitating them. In this article, we are going to take a look at the smart money sentiment surrounding LHC Group, Inc. (NASDAQ:LHCG) and see how the stock performed in comparison to hedge funds' consensus picks.

LHC Group, Inc. (NASDAQ:LHCG) investors should be aware of an increase in activity from the world's largest hedge funds in recent months. Our calculations also showed that LHCG isn't among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video at the end of this article for Q2 rankings).

According to most stock holders, hedge funds are perceived as unimportant, old investment tools of yesteryear. While there are more than 8000 funds trading at present, We hone in on the bigwigs of this club, about 750 funds. These money managers orchestrate the majority of the smart money's total asset base, and by paying attention to their first-class investments, Insider Monkey has unearthed many investment strategies that have historically defeated the S&P 500 index. Insider Monkey's flagship short hedge fund strategy beat the S&P 500 short ETFs by around 20 percentage points annually since its inception in May 2014. Our portfolio of short stocks lost 27.8% since February 2017 (through November 21st) even though the market was up more than 39% during the same period. We just shared a list of 7 short targets in our latest quarterly update .

[caption id="attachment_731850" align="aligncenter" width="1680"] Paul Glazer of Glazer Capital[/caption]

Paul Glazer of Glazer Capital

We leave no stone unturned when looking for the next great investment idea. For example Europe is set to become the world's largest cannabis market, so we check out this European marijuana stock pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. This December, we recommended Adams Energy as a one-way bet based on an under-the-radar fund manager's investor letter and the stock is still extremely cheap despite already gaining 20 percent. Keeping this in mind we're going to take a peek at the recent hedge fund action regarding LHC Group, Inc. (NASDAQ:LHCG).

How are hedge funds trading LHC Group, Inc. (NASDAQ:LHCG)?

At Q3's end, a total of 27 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 4% from the previous quarter. By comparison, 25 hedge funds held shares or bullish call options in LHCG a year ago. So, let's see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

More specifically, Glazer Capital was the largest shareholder of LHC Group, Inc. (NASDAQ:LHCG), with a stake worth $13.4 million reported as of the end of September. Trailing Glazer Capital was Governors Lane, which amassed a stake valued at $11.4 million. BlueCrest Capital Mgmt., Marshall Wace, and Columbus Circle Investors were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position Glazer Capital allocated the biggest weight to LHC Group, Inc. (NASDAQ:LHCG), around 1.64% of its 13F portfolio. Governors Lane is also relatively very bullish on the stock, earmarking 1.51 percent of its 13F equity portfolio to LHCG.

As one would reasonably expect, specific money managers have been driving this bullishness. Millennium Management, managed by Israel Englander, assembled the most outsized position in LHC Group, Inc. (NASDAQ:LHCG). Millennium Management had $2.6 million invested in the company at the end of the quarter. Minhua Zhang's Weld Capital Management also initiated a $1.6 million position during the quarter. The other funds with new positions in the stock are Michael Platt and William Reeves's BlueCrest Capital Mgmt., Paul Marshall and Ian Wace's Marshall Wace, and Mike Vranos's Ellington.

Let's also examine hedge fund activity in other stocks - not necessarily in the same industry as LHC Group, Inc. (NASDAQ:LHCG) but similarly valued. These stocks are Chegg Inc (NYSE:CHGG), LivaNova PLC (NASDAQ:LIVN), Neogen Corporation (NASDAQ:NEOG), and National Health Investors Inc (NYSE:NHI). This group of stocks' market valuations resemble LHCG's market valuation.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position CHGG,32,337398,6 LIVN,13,153754,-3 NEOG,13,24715,1 NHI,15,131310,2 Average,18.25,161794,1.5 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 18.25 hedge funds with bullish positions and the average amount invested in these stocks was $162 million. That figure was $112 million in LHCG's case. Chegg Inc (NYSE:CHGG) is the most popular stock in this table. On the other hand LivaNova PLC (NASDAQ:LIVN) is the least popular one with only 13 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. Our calculations showed that top 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. Hedge funds were also right about betting on LHCG as the stock returned 46.7% in 2019 and outperformed the market. Hedge funds were rewarded for their relative bullishness. Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.

5 Most Popular Stocks Among Hedge Funds

Disclosure: None. This article was originally published at Insider Monkey.

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