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Net profit margin is the percent of revenues that a company takes away as earnings. When companies have increased net margins over time, it indicates increased profitability and a more controlled cost structure.

We used net profit margin to construct a screen of highly profitable stocks. We screened stocks rallying above their 20-day, 50-day, and 200-day moving averages for those that have seen significant growth in net margin over the last five years, with trailing-twelve-month net margin at least 20% higher than the 5-year average.

On top of this, we also screened for those that have seen significant net buying from institutional investors over the current quarter.

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

We also created a price-weighted index of the stocks mentioned below, and monitored the performance of the list relative to the S&P 500 index over the last month. To access a complete analysis of this list's recent performance, click here.


(Click to enlarge)

Do you think these stocks will keep rallying? Use this list as a starting-off point for your own analysis.

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

1. Endeavour International Corporation (NYSE:END): Independent Oil & Gas Industry. Market cap of $599.28M. The stock is currently trading at 10.36% above its 20-Day SMA, 15.31% above its 50-Day SMA, and 27.69% above its 200-Day SMA. Net institutional purchases over the current quarter at 10.8M shares, which represents 41.27% of the company's 26.17M share float. TTM net profit margin at 89.19% vs. 5-year average at -12.56%. The stock is a short squeeze candidate, with a short float at 7.06% (equivalent to 7.11 days of average volume). The stock has had a couple of great days, gaining 7.1% over the last week.

2. BroadSoft, Inc. (NASDAQ:BSFT): Application Software Industry. Market cap of $1.07B. The stock is currently trading at 5.50% above its 20-Day SMA, 0.19% above its 50-Day SMA, and 26.69% above its 200-Day SMA. Net institutional purchases over the current quarter at 4.9M shares, which represents 19.97% of the company's 24.54M share float. TTM net profit margin at 13.31% vs. 5-year average at -6.73%. The stock has had a couple of great days, gaining 5.22% over the last week.

3. National Penn Bancshares Inc. (NASDAQ:NPBC): Regional Banks Industry. Market cap of $1.22B. The stock is currently trading at 3.15% above its 20-Day SMA, 3.90% above its 50-Day SMA, and 3.97% above its 200-Day SMA. Net institutional purchases over the current quarter at 19.2M shares, which represents 19.40% of the company's 98.99M share float. TTM net profit margin at 9.79% vs. 5-year average at -12.27%. The stock is a short squeeze candidate, with a short float at 5.88% (equivalent to 13.62 days of average volume). The stock has had a good month, gaining 14.53%.

4. Stone Energy Corp. (NYSE:SGY): Independent Oil & Gas Industry. Market cap of $1.58B. The stock is currently trading at 3.02% above its 20-Day SMA, 0.93% above its 50-Day SMA, and 22.55% above its 200-Day SMA. Net institutional purchases over the current quarter at 4.8M shares, which represents 10.81% of the company's 44.41M share float. TTM net profit margin at 16.13% vs. 5-year average at -37.14%. This is a risky stock that is significantly more volatile than the overall market (beta = 2.53). The stock has had a couple of great days, gaining 5.89% over the last week.

5. TiVo Inc. (NASDAQ:TIVO): CATV Systems Industry. Market cap of $1.30B. The stock is currently trading at 0.82% above its 20-Day SMA, 3.52% above its 50-Day SMA, and 7.64% above its 200-Day SMA. Net institutional purchases over the current quarter at 9.8M shares, which represents 8.34% of the company's 117.55M share float. TTM net profit margin at 33.69% vs. 5-year average at -6.78%. The stock has gained 31.95% over the last year.

6. Spectrum Pharmaceuticals, Inc. (NASDAQ:SPPI): Biotechnology Industry. Market cap of $523.0M. The stock is currently trading at 7.63% above its 20-Day SMA, 10.67% above its 50-Day SMA, and 41.02% above its 200-Day SMA. Net institutional purchases over the current quarter at 3.8M shares, which represents 8.33% of the company's 45.61M share float. TTM net profit margin at 2.76% vs. 5-year average at -86.60%. The stock has had a couple of great days, gaining 8.41% over the last week.

7. AVEO Pharmaceuticals, Inc. (NASDAQ:AVEO): Biotechnology Industry. Market cap of $734.35M. The stock is currently trading at 7.23% above its 20-Day SMA, 12.79% above its 50-Day SMA, and 34.78% above its 200-Day SMA. Net institutional purchases over the current quarter at 2.2M shares, which represents 8.19% of the company's 26.87M share float. TTM net profit margin at 24.46% vs. 5-year average at -178.33%. The stock has gained 224.65% over the last year.

8. Ariad Pharmaceuticals Inc. (NASDAQ:ARIA): Biotechnology Industry. Market cap of $1.61B. The stock is currently trading at 13.78% above its 20-Day SMA, 28.10% above its 50-Day SMA, and 89.25% above its 200-Day SMA. Net institutional purchases over the current quarter at 7.6M shares, which represents 6.02% of the company's 126.27M share float. TTM net profit margin at 39.97% vs. 5-year average at -93.67%. The stock has had a couple of great days, gaining 7.33% over the last week.

9. Jazz Pharmaceuticals, Inc. (NASDAQ:JAZZ): Biotechnology Industry. Market cap of $1.45B. The stock is currently trading at 9.96% above its 20-Day SMA, 15.84% above its 50-Day SMA, and 48.89% above its 200-Day SMA. Net institutional purchases over the current quarter at 1.4M shares, which represents 5.86% of the company's 23.88M share float. TTM net profit margin at 28.04% vs. 5-year average at -74.31%. This is a risky stock that is significantly more volatile than the overall market (beta = 2.43). The stock has had a couple of great days, gaining 6.66% over the last week.

10. SIRIUS XM Radio Inc. (NASDAQ:SIRI): Broadcasting Industry. Market cap of $8.76B. The stock is currently trading at 8.15% above its 20-Day SMA, 3.85% above its 50-Day SMA, and 29.29% above its 200-Day SMA. Net institutional purchases over the current quarter at 170.7M shares, which represents 4.40% of the company's 3.88B share float. TTM net profit margin at 2.77% vs. 5-year average at -85.71%. The stock has gained 122% over the last year.

11. DuPont Fabros Technology, Inc. (NYSE:DFT): Property Management Industry. Market cap of $1.60B. The stock is currently trading at 4.19% above its 20-Day SMA, 5.49% above its 50-Day SMA, and 12.04% above its 200-Day SMA. Net institutional purchases over the current quarter at 1.6M shares, which represents 2.69% of the company's 59.48M share float. TTM net profit margin at 22.06% vs. 5-year average at -15.39%. The stock is a short squeeze candidate, with a short float at 23.2% (equivalent to 18.74 days of average volume). The stock has gained 9.18% over the last year.

12. New Gold, Inc. (NYSEMKT:NGD): Nonmetallic Mineral Mining Industry. Market cap of $4.17B. The stock is currently trading at 5.01% above its 20-Day SMA, 4.95% above its 50-Day SMA, and 10.56% above its 200-Day SMA. Net institutional purchases over the current quarter at 6.8M shares, which represents 1.75% of the company's 388.52M share float. TTM net profit margin at 23.74% vs. 5-year average at -3.80%. The stock has had a good month, gaining 17.31%.

*Institutional data sourced from Fidelity, net profit margin data sourced from Screener.co, 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.

Source: 12 Highly Profitable and Rallying Stocks With Significant Institutional Buying