4 Technically Undervalued And Profitable Stocks Being Bought By Hedge Funds

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 |  Includes: KBAL, KKR, SEM, USNA
by: Kapitall

If you consider yourself a value investor, here are some ideas to get started on your stock search.

We ran a screen on stocks that have had positive performance quarter-to-quarter for those that still appear undervalued, with PEG below 1 and Price to Free Cash Flow ratios below 15.

We further filtered the stocks for those 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 1-year return over the past two years:

Do you think institutions are right about buying these undervalued, and profitable stocks? We recommend you do your own analysis by starting with the list here.

1. Kimball International, Inc. (KBALB): Manufactures and sells electronic assemblies and furniture in the United States and internationally. Market cap at $463.81M, most recent closing price at $12.30. Net institutional purchases in the current quarter at 2.4M shares, which represents about 8.36% of the company's float of 28.70M shares. As of September 30th, 2012, the top 2 holders of the stock are Donald Smith & Co. and The Vanguard Group.

PEG at 1.00, P/FCF at 10.97, and EPS growth next 5 years at 28%.

2. Kohlberg Kravis Roberts & Co. (NYSE:KKR): A private equity and venture capital firm specializing in acquisitions, leveraged buyouts, management buyouts, and mezzanine investments in large cap companies. Market cap at $3.78B, most recent closing price at $15.56. Net institutional purchases in the current quarter at 21.5M shares, which represents about 9.89% of the company's float of 217.44M shares. As of September 30th, 2012, the top 2 holders of the stock are Lexington Partners VI Holdings and Morgan Stanley.

PEG at 0.16, P/FCF at 1.09, and EPS growth next 5 years at 47%.

3. Select Medical Holdings Corporation (NYSE:SEM): Select Medical Holdings Corporation, through its subsidiary, Select Medical Corporation, operates specialty hospitals and outpatient rehabilitation clinics in the United States. Market cap at $1.39B, most recent closing price at $9.82. Net institutional purchases in the current quarter at 3.9M shares, which represents about 8.68% of the company's float of 44.93M shares. As of September 30th, 2012, the top 2 holders of the stock are T. Rowe Price and California State Teachers Retirement System.

PEG at 0.88, P/FCF at 6.68, and EPS growth next 5 years at 11%.

4. USANA Health Sciences Inc. (NYSE:USNA): Develops, manufactures, distributes, and sells nutritional and personal care products worldwide. Market cap at $504.18M, most recent closing price at $35.09. Net institutional purchases in the current quarter at 1.4M shares, which represents about 21.94% of the company's float of 6.38M shares. As of September 30th, 2012, the top 2 holders of the stock are FMR, LLC and LSV Asset Management.

PEG at 0.54, P/FCF at 7.06, and EPS growth next 5 years at 16%.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

Business relationship disclosure: Kapitall is a team of analysts. This article was written by Sabina Bhatia, one of our writers. We did not receive compensation for this article (other than from Seeking Alpha), and we have no business relationship with any company whose stock is mentioned in this article.