Investing 101: Rallying Stocks With Institutional and Insider Buying
Looking for stocks with upward momentum and bullish sentiment from both insiders and hedge funds? If so, you will likely find this list very interesting.
We searched through a universe of stocks with market caps above $300M to find the names that are experiencing upward momentum. That is to say, we chose stocks that are trading above their 20-day, 50-day and 200-day moving averages.
From there we took the names experiencing significant levels of insider buying over the last six months and net positive investments from institutions over the current quarter.
Using these criteria, we were left with four names, all listed below in detail.
If you would like to become more familiar with these terms and their implications, take a moment to review:
Rallying: When a stock is rallying, it means it is performing above its moving average for a given time period. It is presented as a % of performance relative to the average. When a stock is performing above its 20-day moving average (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.
Many analysts follow insider buying trends because, after all, insiders know more about their companies than anyone else. Their investment activity is closely monitored and can tell us a lot about where they feel the business is heading.
Insider buying is represented as a percentage of the share float. Companies experiencing insider buying over the past six months provide an indicator that insiders think the stock is undervalued at current levels. Inversely, insider selling serves as a negative indicator.
Institutional investors are also known as "big money" investors or managers. They represent big pools of money such as investment banks, pension funds, mutual funds, hedge funds, endowment funds, etc. When they invest in stocks, they can invest hundreds of thousands of dollars or more at one time. These transactions, called "block trades," can have a significant effect on share prices.
Because institutional investors handle such large amounts of money, it is easy enough to assume that the big money managers know what they are doing -- or at the very least know more than the average investor. This is why these investors are also sometimes referred to as "smart money."
If institutional investors start investing in a company, regular investors can assume that some of the most talented analysts and money managers expect the company's share prices to increase over time. The stocks on our list are experiencing significant investment from big money.
The following names have met all of the conditions above. Do you think insiders and hedge funds are right in believing these names have more momentum to price in?
Use the list below as a starting-off point for your own analysis. (Click here to access free, interactive tools to analyze these ideas.)
1. Diamond Foods (NAS: DMND) : Engages in processing, marketing, and distributing snack products, as well as culinary, in-shell, and ingredient nuts. The stock is currently trading 14.87% above its SMA20, 21.70% above its SMA50, and 43.86% above its SMA200. Net institutional purchases in the current quarter at 1.4M shares, which represents about 6.96% of the company's float of 20.11M shares. Over the last six months, insiders were net buyers of 8,225 shares, which represents about 0.04% of the company's 20.11M share float.
2. Akorn (NAS: AKRX) : Engages in the manufacture and marketing of diagnostic and therapeutic pharmaceutical products, hospital drugs, and injectable pharmaceuticals in the United States and internationally. The stock is currently trading 6.82% above its SMA20, 13.39% above its SMA50, and 36.53% above its SMA200. Net institutional purchases in the current quarter at 7.8M shares, which represents about 11.55% of the company's float of 67.56M shares. Over the last six months, insiders were net buyers of 33,500 shares, which represents about 0.05% of the company's 67.56M share float.
3. Rex Energy (NAS: REXX) : Operates as an independent oil and gas company in the Appalachian, Illinois, and Denver-Julesburg Basins. The stock is currently trading 3.39% above its SMA20, 10.17% above its SMA50, and 11.61% above its SMA200. Net institutional purchases in the current quarter at 3.3M shares, which represents about 9.42% of the company's float of 35.04M shares. Over the last six months, insiders were net buyers of 77,325 shares, which represents about 0.22% of the company's 35.04M share float.
4. GenMark Diagnostics (NAS: GNMK) : Operates as a molecular diagnostics company primarily in the United States. The stock is currently trading 1% above its SMA20, 11.49% above its SMA50, and 21.08% above its SMA200. Net institutional purchases in the current quarter at 8.0M shares, which represents about 49.57% of the company's float of 16.14M shares. Over the last six months, insiders were net buyers of 25,500 shares, which represents about 0.16% of the company's 16.14M 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 Eben Esterhuizen and Becca Lipman do not own any of the shares mentioned above. Insider data sourced from Yahoo! Finance, institutional data sourced from Fidelity, all other data from Finviz.
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