Hedge Funds Have Confidence In 6 Rallying European Stocks

Mary-Lynn Cesar, Kapitall: Confidence in the EU is growing, as is GDP, so we looked for potential investment opportunities. 

Economic confidence in the EU rose for the fourth consecutive month in August, reaching a two-year high of 98.1 on the European Commission’s Economic Sentiment Indicator (ESI). Also in the midst of a four month growth streak, confidence in the euro area (monetary union of EU nations that use the euro) climbed by 2.7 points to 95.2 on the ESI, beating Businessweek’s reported expectations of a 93.8 reading.

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The ESI measures manager and consumer confidence in the following sectors within the EU and euro area: construction, consumer, financial services (not included in the euro area ESI), industrial, retail trade, and service. In August, the EU reported improved economic sentiment in every sector, while the euro area experienced increased confidence in every sector but construction.

Within the euro area, fourteen of the seventeen countries experienced a growth in confidence, including the five largest economies: France (+1.6), Germany (+3.3), Italy (+2.0), the Netherlands (+5.2), and Spain (+0.8). The countries with weakening confidence were Finland (-3.0), Greece (-2.6), and Malta (-3.3); in the EU, that list also includes Latvia (-1.2) and Romania (-0.1).

Investing ideas

Earlier this month, the euro area reported 0.3% GDP growth in the second quarter of 2013, hopefully signifying the end of the region’s recession. The last time the euro area’s GDP grew was in the third quarter of 2011, when it posted 0.1% growth. The gradual improvement of the region’s economy and rising economic confidence inspired us to look for investment opportunities within the EU.

We began with a universe comprised of European stocks (specifically those belonging to the EU), which we then screened for bullish sentiment from institutional investors as reflected in significant net institutional purchases over the last quarter representing at least 5% of share float. These purchases indicate that institutional investors, such as hedge fund managers and mutual fund managers, expect these stocks to outperform into the future.

We wanted to find another indicator of upside potential, so we further narrowed down our list by screening for stocks that are rallying above their 20-day, 50-day, and 200-day moving averages (MA). This indicates that these stocks have strong upward momentum.

We were left with six European stocks on our list.

Click on the image below to see return data over time.

Do you think there's more upside potential in store for these European stocks? Use this list as a starting point for your own analysis.

1. Navios Maritime Acquisition ( NNA): Provides marine transportation services. Market cap at $345.53M, most recent closing price at $3.80.

Net institutional purchases in the current quarter at 9.9M shares, which represents about 22.33% of the company's float of 44.33M shares.

The stock is currently rallying 0.58% above its 20-day MA, 3.68% above its 50-day MA, and 21.35% above its 200-day MA.

The company is based in Greece, which has an August ESI reading of 89.1, down 2.6 points from its 91.7 reading in July.
 

2. Safe Bulkers, Inc. ( SB): Provides marine drybulk transportation services worldwide. Market cap at $497.65M, most recent closing price at $6.47.

Net institutional purchases in the current quarter at 1.6M shares, which represents about 5.3% of the company's float of 30.21M shares.

The stock is currently rallying 15.31% above its 20-day MA, 21.93% above its 50-day MA, and 42.30% above its 200-day MA.

The company is based in Greece, which has an August ESI reading of 89.1, down 2.6 points from its 91.7 reading in July.
 

3. Navios Maritime Holdings Inc. ( NM): Operates as a seaborne shipping and logistics company in Greece. Market cap at $641.08M, most recent closing price at $6.08.

Net institutional purchases in the current quarter at 4.2M shares, which represents about 5.39% of the company's float of 77.94M shares.

The stock is currently rallying 0.91% above its 20-day MA, 6.46% above its 50-day MA, and 35.55% above its 200-day MA.

The company is based in Greece, which has an August ESI reading of 89.1, down 2.6 points from its 91.7 reading in July.
 

4. Tornier NV ( TRNX): Operates as a medical device company that designs, manufactures, and markets devices for joint replacement and soft tissue repair that enable surgical specialists to improve patients' lives by restoring motion and physical vitality.

Market cap at $855.53M, most recent closing price at $18.96.

Net institutional purchases in the current quarter at 6.0M shares, which represents about 21.72% of the company's float of 27.63M shares.

The stock is currently rallying 0.18% above its 20-day MA, 5.18% above its 50-day MA, and 8.55% above its 200-day MA.

The company is based in the Netherlands, which has an August ESI reading of 92.7, up 5.2 points from its 87.5 reading in July.
 

5. Diane Shipping Inc. ( DX): Provides shipping transportation services. Market cap at $897.65M, most recent closing price at $10.78.

Net institutional purchases in the current quarter at 4.8M shares, which represents about 7.41% of the company's float of 64.77M shares.

The stock is currently rallying 0.73% above its 20-day MA, 4.64% above its 50-day MA, and 16.73% above its 200-day MA.

The company is based in Greece, which has an August ESI reading of 89.1, down 2.6 points from its 91.7 reading in July.
 

6. Ternium S.A. ( TX): Engages in manufacturing and processing a range of flat and long steel products for construction, home appliances, capital goods, container, food, energy, and automotive industries.

Market cap at $4.89B, most recent closing price at $24.68.

Net institutional purchases in the current quarter at 3.2M shares, which represents about 6.63% of the company's float of 48.25M shares.

The stock is currently rallying 3.62% above its 20-day MA, 7.64% above its 50-day MA, and 12.53% above its 200-day MA.

The company is based in Luxembourg, which has an August ESI reading of 85.1, up 3.3 points from its 81.8 reading in July.

 

( List compiled by Mary-Lynn Cesar. Institutional data sourced from Fidelity. Monthly return data sourced from Zacks Investment Research. All other data sourced from Finviz. )

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