Hedge Funds Are Buying These 4 Stocks Under $5 With Encouraging Sales Trends

Do you consider a company's sales trends when evaluating their stock? One idea is to compare their trends in revenue to their trends in accounts receivable.

Receivables are the portion of revenue not yet received, and since there is no guarantee that the money will ever be received, the smaller the portion of revenue the better. To demonstrate this, we ran a screen on small-cap stocks with market caps just above $300 million for those trading between $1-$5, considering many investors prefer to invest in a low price range.

Why this price range? While many investors enjoy a certain thrill that comes with trading penny stocks, it's a dangerous game. So to avoid the inherent dangers, we turn to the larger companies that are still offered at lower prices.

We then screened for those with positive trends in revenue relative to accounts receivable: increases in revenue outpacing increases in accounts receivable year-over-year, as well as accounts receivable comprising a smaller portion of current assets over the same time period.

Finally, we screened for those with bullish sentiment from institutional investors, with significant net institutional purchases 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 outperform into the future.

Interactive Chart: Press Play to compare changes in market cap over the last two years for the stocks mentioned below. Analyst ratings sourced from Zacks Investment Research. Tool provided by Kapitall. Click the image to enlarge, and login (it's free) to access more research tools and practice portfolios to test your investing ideas 

 

Do you think these companies are seeing strong sales patterns? Use this list as a starting point for your own analysis. [ Access a  performance overview  for all stocks in the list.]

 

1. Bacterin International Holdings, Inc. ( BONE): Develops, manufactures, and markets biologics products in the United States and internationally. Market cap at $62.2M, most recent closing price at $1.46. Net institutional purchases in the current quarter at 1.3M shares, which represents about 5.09% of the company's float of 25.52M shares. Revenue grew by 17.77% during the most recent quarter ($8.88M vs. $7.54M y/y). Accounts receivable grew by 1.13% during the same time period ($7.18M vs. $7.1M y/y). Receivables, as a percentage of current assets, decreased from 41.67% to 24.06% during the most recent quarter (comparing 3 months ending 2012-09-30 to 3 months ending 2011-09-30).

2. Cal Dive International Inc ( DVR): Provides manned diving, pipe laying, and pipe-burial services to the offshore oil and natural gas industry. Market cap at $158.42M, most recent closing price at $1.63. Net institutional purchases in the current quarter at 4.8M shares, which represents about 5.14% of the company's float of 93.36M shares. Revenue grew by 3.91% during the most recent quarter ($138.11M vs. $132.91M y/y). Accounts receivable grew by -3.69% during the same time period ($143.22M vs. $148.7M y/y). Receivables, as a percentage of current assets, decreased from 77.54% to 76.9% during the most recent quarter (comparing 3 months ending 2012-09-30 to 3 months ending 2011-09-30).

3. Novavax, Inc. ( NVAX): Focuses on developing recombinant vaccines for infectious diseases using its virus-like particle platform technology. Market cap at $300.32M, most recent closing price at $2.03. Net institutional purchases in the current quarter at 11.1M shares, which represents about 10.19% of the company's float of 108.88M shares. Revenue grew by 14.97% during the most recent quarter ($5.76M vs. $5.01M y/y). Accounts receivable grew by 8.27% during the same time period ($4.19M vs. $3.87M y/y). Receivables, as a percentage of current assets, decreased from 14.74% to 11.49% during the most recent quarter (comparing 3 months ending 2012-09-30 to 3 months ending 2011-09-30).

4. Power-One Inc. ( PWER): Designs, manufactures, and markets power conversion and power management solutions for the renewable energy (RE), communications infrastructure, and other technology markets. Market cap at $476.12M, most recent closing price at $3.92. Net institutional purchases in the current quarter at 8.8M shares, which represents about 8.73% of the company's float of 100.84M shares. Revenue grew by 15.76% during the most recent quarter ($283.65M vs. $245.03M y/y). Accounts receivable grew by 7.98% during the same time period ($256.83M vs. $237.84M y/y). Receivables, as a percentage of current assets, decreased from 39.81% to 34.42% during the most recent quarter (comparing 13 weeks ending 2012-09-30 to 13 weeks ending 2011-10-02).
 

 

( List compiled by Kapitall's Sabina Bhatia. Accounting data sourced from Google Finance, institutional data from Fidelity, all other data sourced from Finviz.)

 

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