Fund purchases and winning streaks: are these stocks under 10 dollars on their way up?

Mary-Lynn Cesar, Kapitall: The S&P 500 had its longest winning streak of the year last month. Meanwhile, these stocks under 10 dollars are currently in the middle of theirs.

In most bull markets, the S&P 500's win streaks typically last for six days. According to Bespoke Investment Group, that trend changed in 2013 when win streaks started to last for seven or eight days. 

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Unfortunately, that wasn't the case last month.  The S&P 500  recorded a six-session win streak in late April, its longest of the year, as investors waited anxiously for quarterly earnings reports.  Netflix (NFLX)  beat expectations and  announced an impending price hike, exciting   investors even further .

Then more earnings came out, along with the Commerce Department's new home sales numbers, and investors were disappointed. The biotech sector continued to suffer as  Amgen (AMGN) and Biogen IDEC (BIIB) reported earnings that missed estimates, and shares of both stocks slid.

S ales of new homes fell for the second consecutive month in March, dropping  14.5% to a seasonally adjusted annual rate of 384,000. CNNMoney's Matt Egan reported that the weak housing data drove investors to sell shares of home builders and home construction stocks, including Home Depot (HD)KB Home (KBH), and Lennar (LEN)

As investors wait for the next win streak to hit Wall Street, we decided to take a closer look at individual stocks that are currently outperforming the market.  We began with a universe of stocks  on  winning streaks, which is measured by a  persistence of days in which the stock outperformed the S&P 500 and low persistence of days underperforming the index . This ratio is calculated by dividing the longest winning streaks in days by the longest losing streak over the last month.

We then screened for stocks with bullish sentiment from institutional investors, which signals that these investors–hedge fund managers, mutual fund managers, pension funds, and more–believe in the upward potential of these stocks. 

So we further narrowed our list to companies with significant net institutional purchases over the last quarter representing at least 5% of share float

We were left with two stocks on our list. Added bonus: they're under $10.

Click on the interactive chart to view data over time. 

 Do you think these stocks will continue to outperform the market? Use this list as a starting point for your own analysis.

1. Fuel-Tech, Inc. ( FTEK): Uses a suite of advanced technologies to provide boiler optimization, efficiency improvement, and air pollution reduction and control solutions to utility and industrial customers worldwide. Market cap at $137.81, most recent closing price at $6.12.

Net institutional purchases in the current quarter at 836.5K shares, which represents about 5.17% of the company's float of 16.18M shares.

Major investor: Heartland Advisors Inc. at a 3.12% stake.

The stock's average daily alpha vs. the S&P500 index stands at 1.28% (measured close to close, over the last month). During this period, the longest winning streak lasted 5 days (i.e. the stock's daily returns outperformed the S&P 500 for 5 consecutive days). The longest losing streak lasted 1 day (i.e. a win streak / losing streak ratio of 5).

 

2. JAKKS Pacific, Inc. ( JAKK): Designs, produces, markets, and distributes toys and consumer products worldwide. Market cap at $193.19, most recent closing price at $8.75.

Net institutional purchases in the current quarter at 3.3M shares, which represents about 21.57% of the company's float of 15.30M shares.

Major investor: Invesco Ltd. at an 11.19% stake.

The stock's average daily alpha vs. the S&P500 index stands at 1.17% (measured close to close, over the last month). During this period, the longest winning streak lasted 8 days (i.e. the stock's daily returns outperformed the S&P 500 for 8 consecutive days). The longest losing streak lasted 2 days (i.e. a win streak / losing streak ratio of 4).

 

 

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

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