Investing 101: Rallying Stocks Under $10 With Institutional Buying

Before you go, we thought you'd like these...
Before you go close icon

Many investors like trading low-priced stocks because any change in price results in bigger-percentage gains (and losses). But because there's a notable risk to these stocks, traders often wait for some sort of confirmation that the shares are on a bullish path.

Investors could do that by looking at rallying stocks -- i.e., companies that are increasing in value at a rapid rate. It's believed that the momentum behind these names can keep the stocks running on an upward trend for days and weeks to follow, especially if the rally is complemented by high trading volume.

What's more, investors like to know what the big institutional buyers on Wall Street are up to. It's often thought that the more intelligent traders are the ones calling the shots in these big hedge funds, so when there is net buying of shares by these institutions, Main Street investors can consider those purchases a strong vote of confidence in the stock's future.


Here's more information about "rallying" and "institutional buying" and why investors often use this data as trading signals. Below is a list of stocks that have met all these criteria.

The comeback kids
When a stock is rallying, it means it is performing above its moving average for a given time period. When a stock is trading above its 20-day moving average, or MA, as well as its 50- and 200-day moving averages, it signals bullish momentum. All the stocks in this list are rallying above their 20-, 50-, and 200-day MA.

The big backers
Institutional investors are also known as "big money" investors. They manage large pools of money, such as mutual funds and hedge funds.

Because institutional investors handle such large amounts of money, it is easy enough to assume that the big money-managers know more than the average investor. This is why these investors are also sometimes referred to as "smart money," and why their trades are so closely followed.

Business section: investing ideas
To make the list below, we started with stocks trading between $1 and $10 that are trading above their 20-, 50-, and 200-day moving averages. Then we check those names for institutional purchases during the current quarter. Do you think these companies will continue their rallies?

The list is sorted by market cap. (Click here to access free, interactive tools to analyze these ideas.)

1. PulteGroup (NYS: PHM) engages in homebuilding and financial services businesses, primarily in the U.S. Its market cap is $3.71 billion, with a most recent closing price of $9.68. The stock is currently trading at 5.2% above its 20-day simple moving average, 7.73% above its 50-day SMA, and 45.82% above its 200-day SMA. Net institutional purchases in the current quarter are at 19.2 million shares, which represent about 5.6% of the company's float of 343.14 million shares.

2. Glimcher Realty Trust operates as a real-estate investment trust in the U.S. With a market cap at $1.38 billion, its stock most recently closed at $9.93. The stock is currently trading at 0.25% above its 20-day SMA, 0.01% above its 50-day SMA, and 11.40% above its 200-day SMA. Net institutional purchases in the current quarter amount to 10 million shares, which represent about 7.28% of the company's float of 137.27 million shares.

3. PDL BioPharma (NAS: PDLI) engages in the management of antibody humanization patents and royalty assets, also known as the Queen et al. patents. Its market cap is $902.3 million, and the most recent closing price was $6.44. The stock is currently trading at 3.49% above its 20-day SMA, 3.03% above its 50-day SMA, and 9.54% above its 200-day SMA. Net institutional purchases in the current quarter total 12.4 million shares, which represent about 9.65% of the company's float of 128.5 million shares.

4. Western Alliance Bancorporation provides various banking and related products and services in Nevada, Arizona, California, and Colorado. With a market cap of $715.96 million, its stock most recently closed at $8.80. The stock is currently trading at 1.21% above its 20-day SMA, 2.30% above its 50-day SMA, and 25.76% above its 200-day SMA. Net institutional purchases in the current quarter come to 3.5 million shares, which represent about 5.06% of the company's float of 69.16 million shares.

5. Demand Media (NYS: DMD) operates as a content and social-media company in the U.S. Its market cap is $717.45, with a recent closing price of $8.65. The stock is currently trading at 13.72% above its 20-day SMA, 17.19% above its 50-day SMA, and 15.79% above its 200-day SMA. Net institutional purchases in the current quarter are at 3.1 million shares, which represent about 12.4% of the company's float of 25.01 million shares.

6. Flagstone Reinsurance Holdings SA operates as a reinsurance and insurance company worldwide. Its market cap is currently at $564.01 million, with its stock most recently closing at $7.98. The stock is currently trading at 6.19% above its 20-day SMA, 2.91% above its 50-day SMA, and 0.89% above its 200-day SMA. Net institutional purchases in the current quarter total 2.4 million shares, which represent about 5.18% of the company's float of 46.33 million shares.

7. The E. W. Scripps Company operates as a diverse media company with interests in television stations, newspapers, and local news and information websites. With a market cap of $526.39 million, its stock most recently closed at $9.61. The stock is currently trading at 4.88% above its 20-day SMA, 2.13% above its 50-day SMA, and 14.33% above its 200-day SMA. Net institutional purchases in the current quarter come to1.5 million shares, which represent about 8.47% of the company's float of 17.7 million shares.

8. BioScrip (NAS: BIOS) provides pharmacy and home-health services in the U.S. It has a market cap of $425.04 million, and its shares most recently closed at $7.67. The stock is currently trading at 5.04% above its 20-day SMA, 10.38% above its 50-day SMA, and 23.09% above its 200-day SMA. Net institutional purchases in the current quarter come to 3.8 million shares, which represent about 9.83% of the company's float of 38.66 million shares.

9. Hot Topic operates as a mall- and Web-based specialty retailer in the U.S. With a market cap of $417.46 million, its stock most recently closed at $9.92. The stock is currently trading at 0.18% above its 20-day SMA, 1% above its 50-day SMA, and 23.96% above its 200-day SMA. Net institutional purchases in the current quarter are at 2.3 million shares, which represent about 6.5% of the company's float of 35.4 million shares.

10. Santarus (NAS: SNTS) engages in acquiring, developing, and commercializing proprietary products that address the needs of patients treated by physician specialists. Its market cap is $404.46 million, with shares most recently closing at $6.46. The stock is currently trading at 8.67% above its 20-day SMA, 15.81% above its 50-day SMA, and 64.63% above its 200-day SMA. Net institutional purchases in the current quarter total 2.8 million shares, which represent about 6.65% of the company's float of 42.11 million shares.

Interactive Chart: Press Play to compare changes in analyst ratings over the last two years for the stocks mentioned above. Analyst ratings sourced from Zacks Investment Research.


 

At the time this article was published Kapitall's Rebecca Lipman does not own any of the shares mentioned above. Institutional data sourced from Fidelity. All other data sourced from Finviz.The Motley Fool has adisclosure policy. We Fools may not all hold the same opinions, but we all believe thatconsidering a diverse range of insightsmakes us better investors. Try any of our Foolish newsletter servicesfree for 30 days.

Copyright © 1995 - 2012 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.

Read Full Story

Want more news like this?

Sign up for Finance Report by AOL and get everything from business news to personal finance tips delivered directly to your inbox daily!

Subscribe to our other newsletters

Emails may offer personalized content or ads. Learn more. You may unsubscribe any time.

From Our Partners