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.