Value Ideas: 9 Undervalued Stocks Being Snapped Up by Big Money Managers

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 |  Includes: AIG, BZ, FSIN, GAME, GME, HRBN, KKR, KLIC, LINC
by: Kapitall

Best practice is to check several price multiples when using them to assess whether a stock is relatively undervalued – when several are in agreement, the evidence is simply stronger.

With this in mind, we compared price against free cash flow and against earnings growth to find a list of potentially undervalued stocks (P/FCF<10, PEG<1). From this list we found those that have seen net buying from institutional investors over the current quarter. The final list of 9 is below.



Do you think institutional investors think these names are undervalued? Use this list as a starting-off point for your own analysis.

List sorted by net institutional shares bought as a percent of share float.

1. Kohlberg Kravis Roberts & Co. (NYSE:KKR): Asset Management Industry. Market cap of $3.89B. PEG at 0.83. P/FCF at 5.4. Net institutional shares purchased over the current quarter at 40.1M, which is 20.77% of a 193.04M share float. The stock has had a good month, gaining 13.35%.

Recent developments: Announced joint sale with Wendel SA of 15% stake in Legrand Holding SA (Mar. 2011).

2. American International Group, Inc. (NYSE:AIG): Property & Casualty Insurance Industry. Market cap of $55.43B. PEG at 0.23. P/FCF at 3.39. Net institutional shares purchased over the current quarter at 17.9M, which is 12.69% of a 141.05M share float. The stock is currently stuck in a downtrend, trading 5.69% below its SMA20, 12.29% below its SMA50, and 14.38% below its SMA200. The stock has performed poorly over the last month, losing 12.21%.

Recent developments: Announced an affiliate of Perella Weinberg Partners’ Asset Based Strategy entered into an agreement to acquire AIG Rail Services Inc. (April 2011). Federal Reserve Bank of New York rejected AIG’s offer to buy the contents of the central bank’s Maiden Lane II facility of mortgage securities for $15.7B (Mar. 2011).

3. Lincoln Educational Services Corporation (NASDAQ:LINC): Education & Training Services Industry. Market cap of $375.76M. PEG at 0.5. P/FCF at 5.21. Net institutional shares purchased over the current quarter at 2.1M, which is 9.93% of a 21.15M share float. The stock is a short squeeze candidate, with a short float at 5.42% (equivalent to 5.75 days of average volume). The stock has lost 30.66% over the last year.

Recent developments: Announced FY 2011 guidance below analysts’ estimates (Mar. 2011).

4. GameStop Corp. (NYSE:GME)
: Electronics Stores Industry. Market cap of $3.63B. PEG at 0.65. P/FCF at 9.22. Net institutional shares purchased over the current quarter at 11.8M, which is 8.74% of a 135.01M share float. The stock is a short squeeze candidate, with a short float at 27.29% (equivalent to 7.97 days of average volume). The stock has had a good month, gaining 14.48%.

5. Harbin Electric, Inc. (NASDAQ:HRBN)
: Industrial Electrical Equipment Industry. Market cap of $612.19M. PEG at 0.37. P/FCF at 8.42. Net institutional shares purchased over the current quarter at 1.6M, which is 7.97% of a 20.07M share float. This is a risky stock that is significantly more volatile than the overall market (beta = 2.2). The stock is a short squeeze candidate, with a short float at 32.29% (equivalent to 14.37 days of average volume). The stock has lost 12.86% over the last year.

6. Boise Inc. (NYSE:BZ): Paper & Paper Products Industry. Market cap of $738.90M. PEG at 0.62. P/FCF at 4.15. Net institutional shares purchased over the current quarter at 5.3M, which is 7.71% of a 68.74M share float. This is a risky stock that is significantly more volatile than the overall market (beta = 3.47). The stock is a short squeeze candidate, with a short float at 24.79% (equivalent to 8.29 days of average volume).

7. Shanda Games Limited (NASDAQ:GAME): Multimedia & Graphics Software Industry. Market cap of $2.14B. PEG at 0.99. P/FCF at 8.38. Net institutional shares purchased over the current quarter at 4.4M, which is 6.13% of a 71.72M share float. The stock has had a good month, gaining 16.82%.

8. Fushi Copperweld, Inc. (NASDAQ:FSIN): Industrial Electrical Equipment Industry. Market cap of $318.59M. PEG at 0.65. P/FCF at 8.27. Net institutional shares purchased over the current quarter at 1.3M, which is 5.78% of a 22.49M share float. The stock is a short squeeze candidate, with a short float at 21.92% (equivalent to 16.71 days of average volume). The stock has lost 27.6% over the last year.

9. Kulicke & Soffa Industries Inc. (NASDAQ:KLIC):
Semiconductor Equipment & Materials Industry. Market cap of $644.83M. PEG at 0.35. P/FCF at 9.33. Net institutional shares purchased over the current quarter at 3.9M, which is 5.63% of a 69.33M share float. This is a risky stock that is significantly more volatile than the overall market (beta = 2.73).

*Institutional data sourced from Fidelity, share float sourced from Yahoo! Finance, all other data sourced from Finviz.

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