Looking for profitable stocks with the backing of Wall Street’s brightest? We ran a screen with this in mind.
We screened stocks trading on the US exchanges for the bullish backing of institutional buyers, like hedge funds. It’s understood this investor class has more market and company information than the average investor, so their bullishness is something to take note of. We took only the names with significant net institutional purchases over the current quarter, indicating institutional investors expect these names to outperform.
As for profitability, we screened for stocks that have stronger margins than their industry peers. This is important because it would be a mistake to compare margins of an internet company, for example, with a clothes retailer or a construction company as your results would be skewed unfairly.
So to analyze profitability, we compared the companies’ trailing twelve month (TTM) gross, operating, and profit margins with their industry averages to find those more profitable than their peers.TTM Gross margin: This metric that tells us the percentage of a company’s revenue is left after paying all production expenses. Costs include overhead, payroll and taxation. ((revenues – cost of goods sold) / Revenue ) *100 = Gross margin % TTM Operating margin: This tells us the percentage remaining after all operating expenses are paid. Operating expenses include: supplies, repairs, research and development, and depreciation. (Operating Income / Net Operating Revenue) *100 = Operating Margin % TTM Pretax margin: A company’s earnings before taxes. This incorporates all of the expenses associated with business excluding taxes. It can help to determine the overall operating efficiency of the firm. The higher the pretax margin, the more profitable the company. (Net profit before taxes / net sales) *100 = Pretax Margin Business Section: Investing Ideas We list below the 8 stocks that made it through our screens. They have each experienced significant institutional buying in the current quarter and reported higher than average margins in their industry.
Select the service that is right for you!COMPARE ALL SERVICES
Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.
- $2.5+ million portfolio
- Large-cap and dividend focus
- Intraday trade alerts from Cramer
- Weekly roundups
Access the tool that DOMINATES the Russell 2000 and the S&P 500.
- Buy, hold, or sell recommendations for over 4,300 stocks
- Unlimited research reports on your favorite stocks
- A custom stock screener
- Upgrade/downgrade alerts
Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.
- Diversified model portfolio of dividend stocks
- Alerts when market news affect the portfolio
- Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.
- Real Money + Doug Kass + 15 more Wall Street Pros
- Intraday commentary & news
- Ultra-actionable trading ideas
Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.
- 100+ monthly options trading ideas
- Actionable options commentary & news
- Real-time trading community
- Options TV