Institutions Are Buying These 8 Highly Profitable Stocks

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.

List Average 1-Year Return: 20%.

Do you think these stocks will make a strong investments? Institutional investors seem to think so, and according to the interactive chart here, analysts on average agree these stocks are a “buy.”

Use this list as a starting point for your own analysis.

 

1. American International Group, Inc. ( AIG): The company operates property and casualty insurance networks worldwide and conducts activities in the U.S. life insurance and retirement services industry. Market cap at $52.45B. Net institutional purchases in the current quarter at 498.9M shares, which represents about 40.23% of the company’s float of 1.24B shares. TTM gross margin at 22.66% vs. industry average at 17.05%. TTM operating margin at 20.96% vs. industry average at 13.94%. TTM pretax margin at 16.75% vs. industry average at 11.74%.

 

2. Meta Financial Group, Inc. ( CASH): Operates as the holding company for MetaBank, which offers various banking products and services in northwest Iowa, Brookings, central Iowa, and Sioux Empire markets. Market cap at $92.01M. Net institutional purchases in the current quarter at 838.5K shares, which represents about 37.1% of the company’s float of 2.26M shares. TTM gross margin at 95.31% vs. industry average at 65.01%. TTM operating margin at 59.43% vs. industry average at 37.24%. TTM pretax margin at 25.52% vs. industry average at 17.31%.

 

3. First Republic Bank ( FRC): Provides private banking, private business banking, investment management, brokerage, trust services, and real estate lending services in California, Nevada, and New York. Market cap at $4.32B. Net institutional purchases in the current quarter at 4.5M shares, which represents about 6.34% of the company’s float of 71.03M shares. TTM gross margin at 87.32% vs. industry average at 72.12%. TTM operating margin at 56.47% vs. industry average at 46.06%. TTM pretax margin at 39.81% vs. industry average at 22.33%.

 

4. M&T Bank Corporation ( MTB): Operates as the holding company for M&T Bank and M&T Bank, National Association that provide commercial and retail banking services to individuals, corporations and other businesses, and institutions. Market cap at $12.95B. Net institutional purchases in the current quarter at 7.1M shares, which represents about 6.07% of the company’s float of 116.97M shares. TTM gross margin at 86.91% vs. industry average at 72.86%. TTM operating margin at 47.88% vs. industry average at 42.28%. TTM pretax margin at 28.95% vs. industry average at 23.3%.

 

5. National Retail Properties, Inc. ( NNN): A publicly owned equity real estate investment trust. The firm acquires, owns, manages, and develops retail properties in the United States. Market cap at $3.43B. Net institutional purchases in the current quarter at 6.9M shares, which represents about 6.37% of the company’s float of 108.36M shares. TTM gross margin at 55.75% vs. industry average at 42.31%. TTM operating margin at 55.75% vs. industry average at 40.01%. TTM pretax margin at 32.9% vs. industry average at 24.13%.

 

6. Polypore International Inc. ( PPO): Develops, manufactures, and markets microporous membranes used in separation and filtration processes. Market cap at $2.1B. Net institutional purchases in the current quarter at 2.3M shares, which represents about 5.37% of the company’s float of 42.85M shares. TTM gross margin at 45.83% vs. industry average at 34.95%. TTM operating margin at 20.47% vs. industry average at 10.65%. TTM pretax margin at 15.72% vs. industry average at 8.26%.

 

7. RPX Corporation ( RPXC): Provides patent risk management solutions in the United States, Europe, and Asia. Market cap at $471.38M. Net institutional purchases in the current quarter at 2.0M shares, which represents about 7.79% of the company’s float of 25.66M shares. TTM gross margin at 70.69% vs. industry average at 47.72%. TTM operating margin at 28.26% vs. industry average at 16.72%. TTM pretax margin at 28.36% vs. industry average at 14.24%.

 

8. Texas Capital BancShares Inc. ( TCBI): Operates as the holding company for Texas Capital Bank, National Association that provides various banking products and services for commercial and high net worth customers in Texas. Market cap at $1.86B. Net institutional purchases in the current quarter at 2.0M shares, which represents about 5.07% of the company’s float of 39.48M shares. TTM gross margin at 92.25% vs. industry average at 72.12%. TTM operating margin at 59.99% vs. industry average at 46.05%. TTM pretax margin at 42.56% vs. industry average at 22.33%.

 

 

 

 

Written by Rebecca Lipman. Profitability and institutional data sourced from Fidelity, all other data sourced from Finviz.

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