Do you consider the buying trends of “smart money” investors when comparing stocks? We ran a screen with this idea in mind.
Discount to Target Price
We ran a screen of all stocks with market caps above $50 million trading below their analyst price. Analyst target prices can be very useful guides for investors. The target price is a price level set by analysts that, based on their data and estimates, represents their predictions for that company in the upcoming year. When a company’s current market price is deeply lagging to the target price, it may signal that the company has more value to price in (the stock price may rise).
We explore this idea by forming a universe of companies that are currently undervalued to target price. All stocks have a minimum of 5 analysts ratings. And because analysts often have different opinions and tend to be overly optimistic, we use the lowest analyst target price.
EXCLUSIVE OFFER: Jim Cramer’s Protégé, Dave Peltier, only buys Stocks Under $10 that he thinks could potentially double. See what he’s trading today with a 14-day FREE pass.Net Institutional Selling We then screened for names with bearish sentiment from institutional investors, with significant net institutional sales over the last quarter representing at least 5% of share float. This indicates that institutional investors such as hedge fund managers and mutual fund managers expect these names to underperform in the future, despite already trading at a discount to target price. Business Section: Investing Ideas As a recap, these are the criteria for our screens:
- Market cap above $50 million
- Trading below lowest analyst target price
- Seeing significant net selloff from hedge fund managers We were left with 10 stocks. The companies are listed below in detail. [Related: Hedge Funds are Buying Up These 9 Stocks Trading Below Target Price] Analysts seem to think these stocks have upside, but money mangers disagree. Do you think they are right to be selling off the stocks in our list, or are they jumping the gun?
Analyze These Ideas: Read descriptions for all companies mentioned. Login to access free research tools and launch a practice portfolios to test your investing ideas.
1. Amarin Corporation plc (AMRN): Focuses on developing treatments for cardiovascular diseases. Market cap at $1.29B, most recent closing price at $8.62. Of the 10 analysts that have set a target price on the stock, the lowest price target stands at $10. This implies a potential upside of 16.0% from current levels around $8.62. Net institutional sales in the current quarter at -17.6M shares, which represents about 12.59% of the company’s float of 139.78M shares.
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