Seeking Alpha
Value, growth, long-term horizon, medium-term horizon
Profile| Send Message|
( followers)  

Do you like investing with a stock's momentum? Better, do you like to follow the trends of hedge fund managers?

To create the list below we began with a universe of stocks showing upward momentum, trading above their 20-day, 50-day, and 200-day moving averages.

We further filtered our search to look for those stocks that paid a dividend of at least 2%. There were 52 stocks that met the criteria.

Loss of Momentum

Naturally, we want to know if the momentum is over, so we looked into their 13F's for signs of pessimism from institutional traders. We found that 23 of these stocks were being sold off by hedge fund managers over the current quarter at levels of significance (at least 5% of share float). The question is why would institutions sell attractive dividend stocks?

One fundamental reason that would convince hedge fund managers to sell these stocks is troubling accounting. After looking at the balance sheets, we found 4 stocks had troubling inventory trends.

By this we mean growth in quarterly revenue is slower than growth in quarterly inventory year-over-year. The companies also show quarterly inventory increasing as a percent of current assets.

When revenue is growing slower than inventory, it may indicate that the company is having trouble selling its inventory - although this might just indicate inventory building or a change in sales policies.

Interactive Chart: Press Play to compare changes in analyst ratings over the last two years for the stocks mentioned below. Analyst ratings sourced from Zacks Investment Research.

Is the rally over with these 4 dividend stocks? Could an inventory build-up be a reason why hedge funds are taking risk off their books?

Use this list as a starting point for your own analysis.

1. American Science & Engineering Inc. (NASDAQ:ASEI): Together with its subsidiary AS&E Global, Inc., engages in the development, manufacture, marketing, and sale of X-ray inspection systems for detection and security screening solutions in the United States and internationally.

  • Market cap at $576.1M, most recent closing price at $69.41. Dividend yield at 2.9%.
  • Net institutional sales in the current quarter at -515.8K shares, which represents about 6.36% of the company's float of 8.11M shares. The top 2 sellers of the stock are Sparta Asset Management, and American Century Companies.
  • Revenue grew by -15.57% during the most recent quarter ($46.25M vs. $54.78M y/y). Inventory grew by -0.78% during the same time period ($47.33M vs. $47.7M y/y). Inventory, as a percentage of current assets, increased from 15.69% to 17.78% during the most recent quarter (comparing 3 months ending 2012-09-30 to 3 months ending 2011-09-30).
  • The stock is trading 2.27% above its 20-day moving average, 4.81% above its 50-day MA, and 14% above its 200-day MA.

2. Allegheny Technologies Inc. (NYSE:ATI): Produces and sells specialty metals worldwide.

  • Market cap at $3.55B, most recent closing price at $33.11. Dividend yield at 2.25%.
  • Net institutional sales in the current quarter at -78.7M shares, which represents about 74.49% of the company's float of 105.65M shares. The top 2 sellers of the stock are Capital Guardian Trust, and General Electric Co.
  • Revenue grew by -12.01% during the most recent quarter ($1,101.1M vs. $1,251.4M y/y). Inventory grew by 11.% during the same time period ($1,536.6M vs. $1,384.3M y/y). Inventory, as a percentage of current assets, increased from 53.87% to 61.2% during the most recent quarter (comparing 3 months ending 2012-12-31 to 3 months ending 2011-12-31).
  • The stock is trading 3.55% above its 20-day moving average, 10% above its 50-day MA, and 2.28% above its 200-day MA.

3. Calavo Growers Inc. (NASDAQ:CVGW): Procures and markets avocados and other perishable commodities, and prepares and distributes processed avocado products in the United States and internationally.

  • Market cap at $376.98M, most recent closing price at $25.42. Dividend yield at 2.6%.
  • Net institutional sales in the current quarter at -1.0M shares, which represents about 8.37% of the company's float of 11.95M shares. The top 2 sellers of the stock are FMR, LLC, and Invesco Ltd.
  • Revenue grew by -3.94% during the most recent quarter ($141.55M vs. $147.35M y/y). Inventory grew by 29.01% during the same time period ($22.95M vs. $17.79M y/y). Inventory, as a percentage of current assets, increased from 24.89% to 27.5% during the most recent quarter (comparing 3 months ending 2012-10-31 to 3 months ending 2011-10-31).
  • The stock is trading 2.3% above its 20-day moving average, 3% above its 50-day MA, and 1.1% above its 200-day MA.

4. Duke Energy Corporation (NYSE:DUK): Operates as an energy company in the Americas.

  • Market cap at $48.47B, most recent closing price at $68.84. Dividend yield at 4.5%.
  • Net institutional sales in the current quarter at -98.8M shares, which represents about 14.06% of the company's float of 702.91M shares. The top 2 seller of the stock are Capital World Investors, and Capital Research Global Investors.
  • Revenue grew by 69.58% during the most recent quarter ($6,722M vs. $3,964M y/y). Inventory grew by 114.% during the same time period ($3,041M vs. $1,421M y/y). Inventory, as a percentage of current assets, increased from 22.65% to 30.09% during the most recent quarter (comparing 3 months ending 2012-09-30 to 3 months ending 2011-09-30).
  • The stock is trading 2.56% above its 20-day moving average, 6% above its 50-day MA, and 6% above its 200-day MA.

*Institutional data sourced from Fidelity, all other data sourced from Finviz.

Source: Hedge Funds Are Selling These 4 Rallying Dividend Stocks With Troubling Inventory Trends