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If you are looking for investment opportunities around the volatility created during earnings season, this list might be of interest to you.

To create the list below we went back five quarters and selected the names of companies with an average negative earnings surprise of at least -5%. This shows a strong history of underperforming EPS expectations.

We then researched their 13F's looking 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.

Finally, we focused on companies that have a dividend yield of at least 1% but not more than 5%. This allowed us to focus on the better quality credits. Our final list consisted of 3 companies.

The List

Do you think these stocks are ready to change history like hedge funds expect? Use this list as a starting point for your own analysis.

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

1. Holly Energy Partners L.P (NYSE:HEP): Operates a system of petroleum product and crude oil pipelines, storage tanks, distribution terminals, and loading rack facilities.

  • Market cap at $2.36B, most recent closing price at $40.18.
  • Net institutional purchases in the current quarter at 5.0M shares, which represents about 14.44% of the company's float of 34.63M shares. The top 2 holders of the stock are Oppenheimer Funds, and Tortoise Capital Advisors.
  • In Mar 2012: Reported EPS at 0.3 vs. estimate at 0.39 (surprise of -23.1%). In Jun 2012: Reported EPS at 0.32 vs. estimate at 0.37 (surprise of -13.5%). In Sep 2012: Reported EPS at 0.34 vs. estimate at 0.36 (surprise of -5.6%). In Dec 2012: Reported 0.37 vs. estimate at 0.38 (surprise of -2.6%. [Average earnings surprise at -11.2%].
  • The company is expected to report earnings on April 30th, 2013.

2. Owens & Minor Inc. (NYSE:OMI): Provides distribution, third-party logistics, and other supply-chain management services to healthcare providers and suppliers of medical and surgical products, as well as distributes medical and surgical supplies to the acute-care market.

  • Market cap at $2.03B, most recent closing price at $32.04.
  • Net institutional purchases in the current quarter at 3.7M shares, which represents about 5.95% of the company's float of 62.15M shares. The top 2 holders of the stock are River Road Asset Management, and Kayne Anderson Rudnick Investment Management.
  • In Mar 2012: Reported EPS at 0.46 vs. estimate at 0.48 (surprise of -4.2%). In Jun 2012: Reported EPS at 0.48 vs. estimate at 0.49 (surprise of -2%). In Sep 2012: Reported EPS at 0.49 vs. estimate at 0.51 (surprise of -3.9%). In Dec 2012: Reported 0.41 vs. estimate at 0.47 (surprise of -12.8%. [Average earnings surprise at -5.73%].
  • The company is expected to report earnings on April 22nd, 2013.

3. W. P. Carey & Co. LLC (NYSE:WPC): Provides long-term sale-leaseback and build-to-suit transactions for companies worldwide and manages a global investment portfolio.

  • Market cap at $4.66B, most recent closing price at $68.05.
  • Net institutional purchases in the current quarter at 13.7M shares, which represents about 24.06% of the company's float of 56.95M shares. The top 2 holders of the stock are The Vanguard Group, and Paulson & Co.
  • In Sep 2011: Reported EPS at 0.62 vs. estimate at 0.64 (surprise of -3.1%). In Dec 2011: Reported EPS at 0.28 vs. estimate at 0.53 (surprise of -47.2%). In Mar 2012: Reported EPS at 0.3 vs. estimate at 0.55 (surprise of -45.5%). In Sep 2012: Reported 0.06 vs. estimate at 0.49 (surprise of -87.8%. [Average earnings surprise at -45.9%].
  • The company is expected to report earnings on May 7th, 2013.

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

Source: Hedge Funds Are Buying These 3 Dividend Stocks With A Recent History Of Negative Earnings Surprises