Following the "Smart Money"
11/20/2012 8:00 am EST
Looking for popular stocks with big potential upside? The staff at Kapitall.com created a list with this in mind by screening The Standard & Poor's 500 index for names with bullish attention from company insiders and hedge funds.
Many analysts follow insider buying trends because, after all, insiders know more about their companies than anyone else. Their investment activity is closely monitored and can tell us a lot about where they feel the business is heading.
Here we look at insider buying as a percentage of the share float. Companies experiencing insider buying over the past six months provide an indicator that insiders think the stock is undervalued at current levels. Inversely, insider selling serves as a negative indicator.
Institutional investors are also known as “big money” investors. They manage large pools of money such as mutual funds and hedge funds. When they invest in stocks, they can invest hundreds of thousands of dollars or more at one time. These transactions, called “block trades,” can have a significant effect on share prices.
Because institutional investors handle such large amounts of money, it is easy enough to assume that the big money managers know more than the average investor. This is why these investors are also sometimes referred to as “smart money,” and why their trades are so closely followed.
Business Section: Investing Ideas
As a recap, these names are
- Listed on the S&P 500 index
- Seeing net institutional buying in the current quarter
- Seeing net insider buying in the past six months
We were left with 3 names, listed below in details. Use this list as a starting point for your own analysis.
1. Forest Laboratories Inc. (FRX): Develops, manufactures, and sells branded and generic forms of ethical drug products. Market cap at $9.38B, most recent closing price at $35.30. Net institutional sales in the current quarter at -14.8M shares, which represents about 5.63% of the company's float of 263.02M shares. Over the last six months, insiders were net buyers of 4,078,369 shares, which represents about 1.55% of the company's 263.02M share float.
2. Republic Services, Inc. (RSG): Provides non-hazardous solid waste collection, transfer, and disposal services in the United States. Market cap at $10.39B, most recent closing price at $28.44. Net institutional sales in the current quarter at -26.3M shares, which represents about 9.18% of the company's float of 286.62M shares. Over the last six months, insiders were net buyers of 12,854,727 shares, which represents about 4.48% of the company's 286.62M share float.
3. Tenet Healthcare Corp. (THC): Operates acute care hospitals and related health care facilities. Market cap at $2.53B, most recent closing price at $24.30. Net institutional sales in the current quarter at -6.2M shares, which represents about 6.9% of the company's float of 89.91M shares. Over the last six months, insiders were net buyers of 3,000,000 shares, which represents about 3.34% of the company's 89.91M share float.
Institutional data sourced from Fidelity, insider data sourced from Yahoo! Finance, all other data sourced from Finviz. Written by Rebecca Lipman. Find more trading ideas like this at Kapitall.com.