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5 Blue-Chip Stock Buys to Beat the S&P

Laboratory Corporation of America

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Up first on our list of most hated stocks is Laboratory Corporation of America (LH) -- LabCorp for short. This $9 billion firm is one of the largest independent medical lab operators in the U.S., with more than 1,700 patient service centers that provide everything from run-of-the-mill blood tests to more specialized genetic and oncology testing.

But investors hate this stock right now; short sellers have ratcheted LH's short interest ratio up to 13.7, which means that it would take the better part of three weeks for shorts to buy enough shares of LabCorp to cover their bets.

>>5 Rocket Stocks to Buy in October

LabCorp owns around 20% of the independent laboratory market, giving it scale in a business where size certainly matters. Let's face it, medical testing isn't exactly the most exciting business out there, and as a result, patients don't care where they get their medical tests done. As long as the lab is covered by their insurance, location is the deciding factor. So, with a network that spans a bigger geographic footprint, LabCorp's patient net is bigger.

Scale is also important in working out deals with medical providers on one side and insurers on the other. Because LH cuts a big swath, it can make more important deals with both groups.

The introduction of more complex testing products is a big deal for LabCorp - it opens the firm up to testing that yields much higher margins than the run-of-the-mill blood work can provide. As physicians opt for a fuller picture of a patient's health, LH should be able to keep pushing its net margins into the double digits.

Earnings next week are still a big question mark, but for risk-hungry investors, the earnings call could be the big catalyst for shorts to start buying back shares.

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