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

Do you like to follow smart money buying trends? If so, you may be interested in a screen we ran on stocks currently favored by smart money institutional investors.

To create the list we began by screening the industrial sector for those 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 into the future.

Next, we searched among the hedge fund favorites for stocks that are rallying above their 20-day, 50-day, and 200-day moving averages, indicating that these stocks have strong upward momentum.

Finally, we screened for stocks with strong sales trends by comparing growth in revenue to growth in inventory over the last year. We screened for stocks with positive sales trends, with faster growth in revenue than inventory over the last year. Since inventory represents the portion of goods not yet sold, faster growth in revenue than inventory is considered an encouraging sign.

Our final list consisted of three stocks.

A Closer Look

We looked at Primoris Services Corporation (NASDAQ:PRIM) in more detail. The stock trades around $19.65 versus its 52-week range of $10.90-$20.20, up 20% in the past 1-year. The stock trades with a P/E multiple of 19 times versus its competitor Fluor (NYSE:FLR), which trades with a P/E multiple of 15 times.

On January 15, 2013, Primoris announced a $253 million contract for the period between October 1, 2012 and December 31, 2012. The company is expected to report fourth-quarter 2012, and full-year 2012 earnings on March 6, 2013. Analysts expect full-year 2012 earnings to be $1.06, and full-year 2013 earnings to be $1.32. The company maintains a lean balance sheet with $112 million in cash and cash equivalents, and $62 million in long-term debt. Do you think the company's fundamentals justify hedge fund interest?

The List

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

Do you think these stocks are poised to outperform? Use this list as a starting point for your own analysis.

1. BE Aerospace Inc. (NASDAQ:BEAV): Engages in the design, manufacture, sale and service of commercial aircraft and business jet cabin interior products worldwide.

  • Market cap at $5.43B, most recent closing price at $52.21.
  • Net institutional purchases in the current quarter at 5.4M shares, which represents about 5.64% of the company's float of 95.69M shares. The top 2 holders of the stock are Honeywell International, and Lone Pine Capital, LLC.
  • Revenue grew by 22.68% during the most recent quarter ($803.2M vs. $654.7M y/y). Inventory grew by 18.41% during the same time period ($1,752.9M vs. $1,480.4M y/y). Inventory, as a percentage of current assets, decreased from 67.76% to 63.36% during the most recent quarter (comparing 3 months ending 2012-12-31 to 3 months ending 2011-12-31).
  • The stock is currently trading 0.5% above its 20-day moving average, 4% above its 50-day moving average, and 19% above its 200-day moving average.

2. Primoris Services Corporation : Provides a range of construction, fabrication, maintenance, replacement, water and wastewater, and product engineering services.

  • Market cap at $991.31M, most recent closing price at $19.29.
  • Net institutional purchases in the current quarter at 2.6M shares, which represents about 8.7% of the company's float of 29.89M shares. The top 2 holders of the stock are Wells Fargo & Co., and The Vanguard Group.
  • Revenue grew by 15.01% during the most recent quarter ($431.84M vs. $375.48M y/y). Inventory grew by 8.99% during the same time period ($101.27M vs. $92.92M y/y). Inventory, as a percentage of current assets, decreased from 22.72% to 20.22% during the most recent quarter (comparing 3 months ending 2012-09-30 to 3 months ending 2011-09-30).
  • The stock is currently trading 2% above its 20-day moving average, 14% above its 50-day moving average, and 41% above its 200-day moving average.

3. Unifi Inc. (NYSE:UFI): Produces and processes polyester and nylon yarns.

  • Market cap at $300.7M, most recent closing price at $14.96.
  • Net institutional purchases in the current quarter at 2.1M shares, which represents about 15.28% of the company's float of 13.74M shares. The top 2 holders of the stock are Dimensional Fund Advisors, and Impala Asset Management.
  • Revenue grew by 2.97% during the most recent quarter ($172.07M vs. $167.11M y/y). Inventory grew by -6.2% during the same time period ($107.1M vs. $114.18M y/y). Inventory, as a percentage of current assets, decreased from 48.84% to 47.71% during the most recent quarter (comparing 13 weeks ending 2012-12-23 to 13 weeks ending 2011-12-25).
  • The stock is currently trading 9% above its 20-day moving average, 13% above its 50-day moving average, and 22% above its 200-day moving average.

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

Source: Hedge Funds Are Buying These 3 Rallying Industrials With Strong Inventory Trends