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TheStreet Open House

Hedge Funds Are Buying These 6 Stocks With EPS Price Mismatches

Looking for stocks deeply undervalued to analyst expectations? If so, this stock list may be of interest to you:

The names below meet all of the following criteria:

- Market cap above $50 million
- Significantly net purchasing from hedge funds and other institutional buyers in the current quarter.
- Significant Earnings Per Share to Share Price Mismatch.

More information on these screens:

Institutional Buying

Because institutional investors handle such large amounts of money, it is easy enough to assume that they know what they’re 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.

Significantly Undervalued to EPS Trends

We compared price trends to changes in EPS estimates over the last month.

Based on the assumption that P/E is equal to a constant k, increases in EPS should be matched by increases in price. When they don’t match up, a mispricing may have occurred.

We screened for stocks with faster growth in EPS estimates than price over the last month, which may indicate that these names are being undervalued. (A more comprehensive explanation can be found in  this post.)

Business Section: Investing Ideas

Here’s the result of our screen. Look at the data below; Could a mispricing lead to positive upside for these names?

Use this list as a starting point for your own analysis.  List Average 1-Year Return: 82%.

Interactive chart:  Compare changes in average analyst rating over the past two years

1. Abercrombie & Fitch Co. ( ANF): Operates as a specialty retailer of casual apparel for men, women, and kids. Market cap at $3.75B, most recent closing price at $47.17.  Net institutional purchases in the current quarter at 4.5M shares, which represents about 6.15% of the company’s float of 73.19M shares. The EPS estimate for the company’s current year increased from 2.53 to 2.96 over the last 30 days, an increase of 17.%. This increase came during a time when the stock price changed by 12.05% (from 41.75 to 46.78 over the last 30 days).

2. Callon Petroleum Co. ( CPE): Engages in the acquisition, exploration, development, and production of crude oil and natural gas properties in the onshore in Louisiana and Texas, and the offshore waters of the Gulf of Mexico. Market cap at $177.11M, most recent closing price at $4.45.  Net institutional purchases in the current quarter at 2.6M shares, which represents about 7.1% of the company’s float of 36.61M shares. The EPS estimate for the company’s current year increased from 0.05 to 0.06 over the last 30 days, an increase of 20.%. This increase came during a time when the stock price changed by 5.94% (from 4.21 to 4.46 over the last 30 days).

3. John B Sanfilippo & Son Inc. ( JBSS): Engages in processing and marketing tree nuts and peanuts in the United States. Market cap at $204.41M, most recent closing price at $18.98.  Net institutional purchases in the current quarter at 492.8K shares, which represents about 6.45% of the company’s float of 7.64M shares. The EPS estimate for the company’s current year increased from 1.66 to 2.07 over the last 30 days, an increase of 24.7%. This increase came during a time when the stock price changed by 10.12% (from 16.3 to 17.95 over the last 30 days).

4. M/I Homes, Inc. ( MHO): Engages in the construction and sale of single-family residential properties. Market cap at $524.64M, most recent closing price at $24.47.  Net institutional purchases in the current quarter at 3.8M shares, which represents about 18.33% of the company’s float of 20.73M shares. The EPS estimate for the company’s current year increased from 0.47 to 0.61 over the last 30 days, an increase of 29.79%. This increase came during a time when the stock price changed by 7.95% (from 21.38 to 23.08 over the last 30 days).

5. Standard Pacific Corp. ( SPF): Operates as a diversified builder of single-family attached and detached homes in the United States. Market cap at $1.5B, most recent closing price at $7.08.  Net institutional purchases in the current quarter at 18.4M shares, which represents about 16.14% of the company’s float of 114.01M shares. The EPS estimate for the company’s current year increased from 0.18 to 0.19 over the last 30 days, an increase of 5.56%. This increase came during a time when the stock price changed by 1.55% (from 6.45 to 6.55 over the last 30 days).

6. Visteon Corp. ( VC): Supplies automotive systems, modules, and components to automotive original equipment manufacturers worldwide. Market cap at $2.67B, most recent closing price at $50.55.  Net institutional purchases in the current quarter at 2.5M shares, which represents about 5.34% of the company’s float of 46.79M shares. The EPS estimate for the company’s current year increased from 2.57 to 2.87 over the last 30 days, an increase of 11.67%. This increase came during a time when the stock price changed by 4.69% (from 48.43 to 50.7 over the last 30 days).

 

 

Written by Kapitall’s Rebecca Lipman.

 

 

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