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Do you like to follow smart money buying and selling trends? We ran a screen with this idea in mind.

We began by screening the financials industry for stocks reporting earnings in January. This is helpful for those investors trying to take an investment opportunity around earnings season.

We then screened for those that also appear undervalued relative to their Graham Numbers, a measure of maximum fair value created by the "godfather of value investing," Benjamin Graham.

The number is based off of a stock's EPS and book value per share (BVPS).

Graham Number = SQRT(22.5 x TTM EPS x MRQ BVPS)

The equation assumes that P/E should not be higher than 15 and P/BV should not be higher than 1.5. Stocks trading well below their Graham Number may be undervalued.

We then screened for stocks 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 in the future.

For an interactive version of this chart, click on the image below. Analyst ratings sourced from Zacks Investment Research.

Do you think these stocks should be trading higher? Use this list as a starting point for your own analysis.

1. Flagstar Bancorp Inc. (NYSE:FBC): Operates as the holding company for Flagstar Bank, FSB that offers consumer and commercial financial products and services to individuals, and small and middle market businesses in Michigan, Indiana, and Georgia. Market cap at $959.16M, most recent closing price at $17.18. Net institutional purchases in the current quarter at 4.1M shares, which represents about 20.87% of the company's float of 19.65M shares. Diluted TTM earnings per share at 1.21, and a MRQ book value per share value at 17.76, implies a Graham Number fair value = sqrt(22.5*1.21*17.76) = $21.99. Based on the stock's price at $17.85, this implies a potential upside of 23.19% from current levels.

The company is expected to report on January 23rd, 2013. The top 2 holders of the stock are MP Global Advisors III, and RBF Capital, LLC.

2. Heartland Financial USA Inc. (NASDAQ:HTLF): Provides commercial and retail banking services to businesses and individuals. Market cap at $419.35M, most recent closing price at $25.40. Net institutional purchases in the current quarter at 667.3K shares, which represents about 5.53% of the company's float of 12.06M shares. Diluted TTM earnings per share at 2.55, and a MRQ book value per share value at 18.81, implies a Graham Number fair value = sqrt(22.5*2.55*18.81) = $32.85. Based on the stock's price at $26.39, this implies a potential upside of 24.48% from current levels.

The company is expected to report on January 28th, 2013. The top 2 holders of the stock are Dubuque Bank & Trust Co., and Northern Trust Corp.

3. Provident New York Bancorp (PBNY): Operates as the holding company for Provident Bank that provides commercial, community, and retail banking products and services to businesses and individuals in New York and New Jersey. Market cap at $401.81M, most recent closing price at $9.06. Net institutional purchases in the current quarter at 6.8M shares, which represents about 20.18% of the company's float of 33.69M shares. Diluted TTM earnings per share at 0.52, and a MRQ book value per share value at 11.26, implies a Graham Number fair value = sqrt(22.5*0.52*11.26) = $11.48. Based on the stock's price at $9.28, this implies a potential upside of 23.68% from current levels. The company is expected to report on January 23rd, 2013.

The top 2 holders of the stock are Dimensional Fund Advisors, and Endicott Management Co.

EPS and BVPS data sourced from Yahoo! Finance, all other data sourced from Finviz.

Source: Hedge Funds Are Buying These 3 Financials Reporting In January And Undervalued By The Graham Number