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Do Hedge Funds Love LHC Group, Inc. (LHCG)?

Debasis Saha

We at Insider Monkey have gone over 821 13F filings that hedge funds and prominent investors are required to file by the SEC The 13F filings show the funds' and investors' portfolio positions as of March 31st, near the height of the coronavirus market crash. In this article, we look at what those funds think of LHC Group, Inc. (NASDAQ:LHCG) based on that data.

Is LHC Group, Inc. (NASDAQ:LHCG) a bargain? Investors who are in the know are getting more bullish. The number of long hedge fund positions moved up by 1 lately. Our calculations also showed that LHCG isn't among the 30 most popular stocks among hedge funds (click for Q1 rankings and see the video for a quick look at the top 5 stocks). Video: Watch our video about the top 5 most popular hedge fund stocks.

In the 21st century investor’s toolkit there are a lot of gauges stock market investors use to grade stocks. A couple of the most underrated gauges are hedge fund and insider trading signals. Our experts have shown that, historically, those who follow the best picks of the best investment managers can outperform the market by a significant margin (see the details here).

[caption id="attachment_731850" align="aligncenter" width="400"] Paul Glazer of Glazer Capital[/caption]

Paul Glazer of Glazer Capital

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, 2020’s unprecedented market conditions provide us with the highest number of trading opportunities in a decade. So we are checking out stocks recommended/scorned by legendary Bill Miller. We interview hedge fund managers and ask them about their best ideas. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Now let's take a glance at the key hedge fund action regarding LHC Group, Inc. (NASDAQ:LHCG).

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

At Q1's end, a total of 27 of the hedge funds tracked by Insider Monkey were long this stock, a change of 4% from the fourth quarter of 2019. On the other hand, there were a total of 23 hedge funds with a bullish position in LHCG a year ago. So, let's review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Is LHCG A Good Stock To Buy?

When looking at the institutional investors followed by Insider Monkey, Omni Partners, managed by Steven Clark, holds the most valuable position in LHC Group, Inc. (NASDAQ:LHCG). Omni Partners has a $18.3 million position in the stock, comprising 1.6% of its 13F portfolio. Coming in second is Bayberry Capital Partners, led by Angela Aldrich, holding a $15 million position; the fund has 6.1% of its 13F portfolio invested in the stock. Remaining peers with similar optimism comprise Paul Glazer's Glazer Capital, Michael Platt and William Reeves's BlueCrest Capital Mgmt. and Principal Global Investors's Columbus Circle Investors. In terms of the portfolio weights assigned to each position Fort Baker Capital Management allocated the biggest weight to LHC Group, Inc. (NASDAQ:LHCG), around 6.8% of its 13F portfolio. Bayberry Capital Partners is also relatively very bullish on the stock, earmarking 6.12 percent of its 13F equity portfolio to LHCG.

As industrywide interest jumped, some big names have jumped into LHC Group, Inc. (NASDAQ:LHCG) headfirst. Omni Partners, managed by Steven Clark, created the largest position in LHC Group, Inc. (NASDAQ:LHCG). Omni Partners had $18.3 million invested in the company at the end of the quarter. Angela Aldrich's Bayberry Capital Partners also made a $15 million investment in the stock during the quarter. The other funds with brand new LHCG positions are Steve Pigott's Fort Baker Capital Management, Bhagwan Jay Rao's Integral Health Asset Management, and Lawrence Hawkins's Prosight Capital.

Let's now review hedge fund activity in other stocks similar to LHC Group, Inc. (NASDAQ:LHCG). We will take a look at Zions Bancorporation, National Association (NASDAQ:ZION), Oshkosh Corporation (NYSE:OSK), Dunkin Brands Group Inc (NASDAQ:DNKN), and New York Community Bancorp, Inc. (NYSE:NYCB). This group of stocks' market values are closest to LHCG's market value.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position ZION,33,112685,-10 OSK,22,214910,-6 DNKN,34,207067,3 NYCB,22,192830,-5 Average,27.75,181873,-4.5 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 27.75 hedge funds with bullish positions and the average amount invested in these stocks was $182 million. That figure was $152 million in LHCG's case. Dunkin Brands Group Inc (NASDAQ:DNKN) is the most popular stock in this table. On the other hand Oshkosh Corporation (NYSE:OSK) is the least popular one with only 22 bullish hedge fund positions. LHC Group, Inc. (NASDAQ:LHCG) is not the least popular stock in this group but hedge fund interest is still below average. This is a slightly negative signal and we'd rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 8.3% in 2020 through the end of May and surpassed the market by 13.2 percentage points. Unfortunately LHCG wasn't nearly as popular as these 10 stocks (hedge fund sentiment was quite bearish); LHCG investors were disappointed as the stock returned 15.9% during the second quarter and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 10 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2020.

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

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