The healthcare sector, represented by the Health Care Select Sector SPDR Fund (XLV), has been one of the leading performers in 2014. As a result, institutional investors have invested heavily in for-profit hospital companies such HCA Holdings (HCA), Community Health Systems (CYH), and Universal Health Services (UHS).
The above graph shows LifePoint Hospitals’ (LPNT) ownership structure in January 2015. As you can see, it’s dominated by investment advisors, or mutual funds, which account for about 80.1% of the total ownership picture. Dimensional Fund Advisors, Vanguard Group, and American Century Companies are the top-three mutual fund investors in the company. Hedge funds account for about 10.8% of LifePoint Hospitals’ ownership, while pension funds and insurance companies combined own 4.4% of the company’s shares.
The graph shows that institutional interest in LifePoint Hospitals has remained high since 2011. Institutional investors are in contact with company management and employ trained analysts and researchers to predict the company outlook. Big institutions with large stakes in the company can also exercise significant voting power to promote decisions that increase shareholder wealth.
In 2013, many hedge funds increased their positions in LifePoint Hospitals. Hedge funds such as Larry Robbin’s Glenview Capital Management invested about 1.8% of the fund’s 13F portfolio in LifePoint Hospitals. Meanwhile, Dreman Value Management invested 1% of its 13F portfolio in the company.
The major hedge funds project that the Affordable Care Act will benefit LifePoint Hospitals, as increased insurance levels, especially in rural markets, will increase the company’s revenues. With substantial part of the Act’s gains already realized in 2013, hedge funds marginally decreased their holdings in the company in 2014. This signals a slowdown in the company’s projected growth rate.