U.S. Outlook Brightens: Hedge Funds Think These Stocks Will Outperform
Statistics released Friday gave the United States a few things to cheer about: The confidence levels of U.S. consumers keeps going up, fueled by falling gasoline prices, a drop in unemployment, and a rebound in stocks. But wait, there's more!
To start, consumer confidence among U.S. citizens beat forecasts in December. "The Thomson Reuters/University of Michigan preliminary index of consumer sentiment rose to 67.7, a six-month high, from 64.1 at the end of November. The median estimate of 73 economists surveyed by Bloomberg News called for a reading of 65.8," reports Bloomberg.
This is still a far cry from the 89 averaged in the five years leading up to the recession beginning December 2007 through June 2009. Still, an improvement should not go unnoticed.
Other good news
The U.S. trade deficit shrank to its lowest level this year. Due to a drop in imports the deficit shrank by 1.6%, from $44.2 billion to $43.5 billion.
The drop is smaller than forecasted, which can be explained by a drop in purchases from overseas. According to Bloomberg, that is "due almost entirely to a plunge in demand for petroleum."
Further good news for the economy: The numbers show increased imports of capital goods, like computers and aircraft, and consumer goods -- a sign that American companies and households are increasing their spending.
Let's recap: Consumer spending is on the rise, consumer confidence is on the rise, business spending is on the rise, retailers have reported a successful sales at start to the holiday season, and the trade deficit is dropping.
Sure, there are still downsides: There is still high unemployment, lower export demand and the European debt crisis to worry about. China may still have a hard landing, and Americans remain concerned about possible inflation.
But through it all we were wondering which big names are expected to increase in value. To get some ideas we did a search for the largest S&P 500 companies by market cap (over $10 billion).
We took that universe of large caps and further screened it for names that have experienced the most significant levels of net institutional buying.
Institutional buying (net purchases from mutual funds, hedge funds, pensions, and bank trust departments) signals that sophisticated investors believe there is more upside than downside to the names.
The "smart money" thinks these stocks have the momentum to push even higher -- do you?
List sorted by net institutional shares purchased. (Click here to access free, interactive tools to analyze these ideas.)
1. Express Scripts (NAS: ESRX) : Provides a range of pharmacy benefit management (PBM) services in North America. Market cap of $22.37B. Net institutional shares purchased over the current quarter at 45.1M, which is 9.34% of the company's 482.77M share float.
2. Avalonbay Communities (NYS: AVB) : Engages in the development, redevelopment, acquisition, ownership, and operation of multifamily communities in the United States. Market cap of $11.95B. Net institutional shares purchased over the current quarter at 7.9M, which is 8.38% of the company's 94.24M share float.
3. Ecolab (NYS: ECL) : Develops and markets products and services for the hospitality, foodservice, healthcare, and industrial markets primarily in the United States. Market cap of $12.97B. Net institutional shares purchased over the current quarter at 16.7M, which is 8.13% of the company's 205.49M share float.
4. Capital One Financial (NYS: COF) : Operates as the bank holding company for the Capital One Bank (USA), National Association and Capital One, National Association, which provide various financial products and services in the United States, Canada, and the United Kingdom. Market cap of $21.18B. Net institutional shares purchased over the current quarter at 32.5M, which is 7.19% of the company's 451.81M share float.
5. Williams Companies (NYS: WMB) : Engages in finding, producing, gathering, processing, and transporting natural gas primarily in the United States. Market cap of $18.65B. Net institutional shares purchased over the current quarter at 35.0M, which is 5.96% of the company's 587.29M share float.
6. HCP (NYS: HCP) : HCP, Inc. is an independent hybrid real estate investment trust. Market cap of $15.83B. Net institutional shares purchased over the current quarter at 24.0M, which is 5.92% of the company's 405.14M share float.
7. The Mosaic Company (NYS: MOS) : Engages in the production and marketing of concentrated phosphate- and potash-based crop nutrients for the agriculture industry worldwide. Market cap of $22.56B. Net institutional shares purchased over the current quarter at 21.9M, which is 4.91% of the company's 446.15M share float.
8. Whole Foods Market (NYS: WFM) : Engages in the ownership and operation of natural and organic food supermarkets. Market cap of $12.41B. Net institutional shares purchased over the current quarter at 7.6M, which is 4.63% of the company's 163.99M share float.
9. Boston Properties (NYS: BXP) : Boston Properties, Inc., a real estate investment trust (REIT), together with its subsidiaries, engages in the ownership and development of office properties. Market cap of $14.10B. Net institutional shares purchased over the current quarter at 5.7M, which is 3.92% of the company's 145.34M share float.
10. Public Storage (NYS: PSA) : Operates as a real estate investment trust (REIT). Market cap of $22.27B. Net institutional shares purchased over the current quarter at 5.5M, which is 3.87% of the company's 142.09M share float.
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.
Kapitall's Rebecca Lipman does not own any of the shares mentioned above. Institutional data sourced from Fidelity.
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