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Analysts follow the buying trends of institutional investors such as hedge fund managers and mutual fund managers (a.k.a. the “smart money”) because they have access to sophisticated research and have a lot of experience choosing investments. When a stock sees increased buying from institutional investors, it’s a sign to take a second look.

We ran a screen on stocks trading under $5 that also appear undervalued to earnings growth, with PEG below 1. We screened these stocks for those seeing significant net institutional purchases 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 agree with the smart money on these names? 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. Sunrise Senior Living Inc. (SRZ): Provides senior living services in the United States, Canada, the United Kingdom, and Germany. Market cap of $278.35M. Price as of close 9/28 at $4.83. PEG at 0.48. Net institutional shares purchased over the current quarter at 13.2M, which is 26.12% of the company's 50.53M share float. The stock is a short squeeze candidate, with a short float at 13.07% (equivalent to 7.35 days of average volume). It's been a rough couple of days for the stock, losing 5.29% over the last week.

2. The McClatchy Company (NYSE:MNI): Operates as a newspaper publisher in the United States. Market cap of $106.50M. Price as of close 9/28 at $1.25. PEG at 0.69. Net institutional shares purchased over the current quarter at 9.9M, which is 20.42% of the company's 48.48M share float. This is a risky stock that is significantly more volatile than the overall market (beta = 3.23). The stock is a short squeeze candidate, with a short float at 44.17% (equivalent to 41.97 days of average volume). It's been a rough couple of days for the stock, losing 7.41% over the last week.

3. China New Borun Corporation (NYSE:BORN): Produces and distributes corn-based edible alcohol in the People's Republic of China. Market cap of $92.37M. Price as of close 9/28 at $3.59. PEG at 0.10. Net institutional shares purchased over the current quarter at 1.1M, which is 19.20% of the company's 5.73M share float. The stock has performed poorly over the last month, losing 17.85%.

4. Winner Medical Group Inc. (NASDAQ:WWIN): Engages in the research, development, manufacture, and marketing of cotton-base medical dressings and medical disposables. Market cap of $76.52M. Price as of close 9/28 at $3.17. PEG at 0.25. Net institutional shares purchased over the current quarter at 746.6K, which is 12.94% of the company's 5.77M share float. The stock is currently stuck in a downtrend, trading 7.39% below its SMA20, 17.62% below its SMA50, and 32.99% below its SMA200. The stock has lost 29.24% over the last year.

5. Deerfield Capital Corp. (DFR): Operates as a real estate investment trust. Market cap of $85.29M. Price as of close 9/28 at $4.21. PEG at 0.06. Net institutional shares purchased over the current quarter at 596.7K, which is 12.38% of the company's 4.82M share float. This is a risky stock that is significantly more volatile than the overall market (beta = 3.25). The stock has had a couple of great days, gaining 6.05% over the last week. The stock has performed poorly over the last month, losing 17.61%.

6. SciClone Pharmaceuticals, Inc. (NASDAQ:SCLN): Engages in the development and commercialization of novel therapeutics for the treatment of oncology, infectious diseases, cardiovascular, urological, respiratory, and central nervous system disorders in the People's Republic of China and internationally. Market cap of $216.37M. Price as of close 9/28 at $3.71. PEG at 0.57. Net institutional shares purchased over the current quarter at 5.8M, which is 12.35% of the company's 46.98M share float. The stock is a short squeeze candidate, with a short float at 6.11% (equivalent to 7.58 days of average volume). It's been a rough couple of days for the stock, losing 7.94% over the last week.

7. PRGX Global, Inc. (NASDAQ:PRGX): Provides recovery audit, healthcare claims recovery audit, and business analytics and advisory services. Market cap of $113.01M. Price as of close 9/28 at $4.62. PEG at 0.72. Net institutional shares purchased over the current quarter at 1.8M, which is 11.74% of the company's 15.33M share float. The stock is currently stuck in a downtrend, trading 11.61% below its SMA20, 21.82% below its SMA50, and 28.48% below its SMA200. It's been a rough couple of days for the stock, losing 5.71% over the last week.

8. China Techfaith Wireless Communication Technology Limited (NASDAQ:CNTF): Operates as an original developed products provider that is focused on the original design and sale of mobile phones in the People's Republic of China and internationally. Market cap of $99.51M. Price as of close 9/28 at $1.88. PEG at 0.12. Net institutional shares purchased over the current quarter at 2.6M, which is 10.62% of the company's 24.49M share float. It's been a rough couple of days for the stock, losing 8.29% over the last week.

9. Westell Technologies Inc. (NASDAQ:WSTL): Engages in the design, distribution, marketing, and servicing a range of broadband, digital transmission, remote monitoring, power distribution, and demarcation products used by telephone companies and other telecommunications service providers. Market cap of $154.60M. Price as of close 9/28 at $2.24. PEG at 0.15. Net institutional shares purchased over the current quarter at 4.6M, which is 9.52% of the company's 48.30M share float. The stock has performed poorly over the last month, losing 12.16%.

10. Canadian Solar Inc. (NASDAQ:CSIQ): Engages in the design, development, manufacture, and sale of solar power products in Canada and internationally. Market cap of $180.65M. Price as of close 9/28 at $4.15. PEG at 0.15. Net institutional shares purchased over the current quarter at 2.7M, which is 9.06% of the company's 29.81M share float. This is a risky stock that is significantly more volatile than the overall market (beta = 3.37). The stock is a short squeeze candidate, with a short float at 19.05% (equivalent to 7.62 days of average volume). It's been a rough couple of days for the stock, losing 7.37% over the last week.

11. Callon Petroleum Co. (NYSE:CPE): Engages in the acquisition, exploration, development, and production of crude oil and natural gas properties in the onshore in Louisiana and Texas, and the offshore waters of the Gulf of Mexico. Market cap of $157.52M. Price as of close 9/28 at $4.00. PEG at 0.57. Net institutional shares purchased over the current quarter at 3.1M, which is 8.19% of the company's 37.83M share float. This is a risky stock that is significantly more volatile than the overall market (beta = 2.39). It's been a rough couple of days for the stock, losing 20.48% over the last week.

12. Harvard Bioscience Inc. (NASDAQ:HBIO): Develops, manufactures, and markets apparatus and scientific instruments used in life science research in pharmaceutical and biotechnology companies, universities, and government laboratories in the United States and internationally. Market cap of $125.36M. Price as of close 9/28 at $4.40. PEG at 0.28. Net institutional shares purchased over the current quarter at 1.6M, which is 7.80% of the company's 20.52M share float. The stock has gained 24.29% over the last year.

13. Fushi Copperweld, Inc. (NASDAQ:FSIN): Develops, designs, manufactures, markets, and distributes bimetallic wire products, principally copper-clad aluminum (NYSEMKT:CCA) and copper-clad steel (NYSE:CCS). Market cap of $189.47M. Price as of close 9/28 at $4.96. PEG at 0.59. Net institutional shares purchased over the current quarter at 1.4M, which is 6.24% of the company's 22.44M share float. The stock is a short squeeze candidate, with a short float at 31.59% (equivalent to 28.12 days of average volume). It's been a rough couple of days for the stock, losing 16.78% over the last week.

14. Giant Interactive Group, Inc. (NYSE:GA): Develops and operates online games in the People's Republic of China. Market cap of $763.57M. Price as of close 9/28 at $3.32. PEG at 0.48. Net institutional shares purchased over the current quarter at 4.8M, which is 5.32% of the company's 90.17M share float. The stock is currently stuck in a downtrend, trading 23.5% below its SMA20, 28.08% below its SMA50, and 28.42% below its SMA200. It's been a rough couple of days for the stock, losing 10.03% over the last week.

15. Metalico Inc. (NYSEMKT:MEA): Engages in scrap metal recycling and lead metal products fabricating activities primarily in the United States. Market cap of $183.63M. Price as of close 9/28 at $3.87. PEG at 0.88. Net institutional shares purchased over the current quarter at 2.0M, which is 4.82% of the company's 41.48M share float. The stock is a short squeeze candidate, with a short float at 5.26% (equivalent to 5.16 days of average volume). The stock has lost 3.49% over the last year.

16. Center Financial Corporation (NASDAQ:CLFC): Operates as the holding company of Center Bank, which offers financial services for small to medium sized business customers primarily in Southern California. Market cap of $185.63M. Price as of close 9/28 at $4.65. PEG at 0.81. Net institutional shares purchased over the current quarter at 1.6M, which is 4.51% of the company's 35.50M share float. The stock is currently stuck in a downtrend, trading 8.82% below its SMA20, 14.84% below its SMA50, and 29.92% below its SMA200. The stock has performed poorly over the last month, losing 16.67%.

17. China Ming Yang Wind Power Group Limited (NYSE:MY): Designs, manufactures, sells, and services megawatt-class wind turbines in China. Market cap of $357.50M. Price as of close 9/28 at $2.86. PEG at 0.17. Net institutional shares purchased over the current quarter at 3.6M, which is 5.57% of the company's 64.65M share float. The stock is currently stuck in a downtrend, trading 10.83% below its SMA20, 25.64% below its SMA50, and 61.98% below its SMA200. The stock has performed poorly over the last month, losing 20.33%.

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

Source: 17 Undervalued Smart Money Picks Trading Under $5