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Interested in finding the penny stocks that are being chased by hedge funds and other institutional investors? To compile this list we started with a universe of about 200 stocks trading under $2 (we only focused on companies with market caps north of $100M).

For each stock we analyzed institutional flows, and identified the final list of cheap stocks that have seen a sharp increase in institutional ownership during 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.

Big money managers seem to think these cheap stocks will go on to bigger things--do you agree? Use this list as a starting point for your own analysis.

List sorted by market cap.

1. Eastman Kodak Co. (EK): Provides imaging technology products and services to the photographic and graphic communications markets worldwide. Current price at $1.40. Net institutional purchases in the current quarter at 19.7M shares, which represents about 7.35% of the company's float of 267.95M shares.

2. Claude Resources, Inc. (NYSEMKT:CGR): Engages in the acquisition, exploration, and development of precious metal properties, as well as production and marketing of minerals in Canada. Current price at $1.71. Net institutional purchases in the current quarter at 12.8M shares, which represents about 7.85% of the company's float of 163.14M shares.

3. Powerwave Technologies Inc. (NASDAQ:PWAV): Engages in the design, manufacture, marketing, and sale of wireless solutions for wireless communications networks worldwide. Current price at $1.49. Net institutional purchases in the current quarter at 6.7M shares, which represents about 5.42% of the company's float of 123.69M shares.

4. Midway Gold Corp. (NYSEMKT:MDW): Engages in the acquisition, exploration, and development of mineral properties in North America. Current price at $1.92. Net institutional purchases in the current quarter at 10.9M shares, which represents about 14.27% of the company's float of 76.41M shares.

5. Cell Therapeutics, Inc. (NASDAQ:CTIC): Engages in the development, acquisition, and commercialization of drugs for the treatment of cancer. Current price at $1.10. Net institutional purchases in the current quarter at 18.4M shares, which represents about 10.% of the company's float of 184.09M shares.

6. YM BioSciences Inc. (YMI): Engages in the licensing and commercialization of drug products and technologies primarily for the treatment of cancer or cancer-related conditions worldwide. Current price at $1.85. Net institutional purchases in the current quarter at 9.9M shares, which represents about 9.32% of the company's float of 106.25M shares.

7. Valence Technology Inc. (VLNC): Develops, manufactures, sells, and supplies high-energy power systems in the United States and internationally. Current price at $1.05. Net institutional purchases in the current quarter at 17.1M shares, which represents about 19.97% of the company's float of 85.61M shares.

8. Doral Financial Corp. (NYSE:DRL): Provides a range of banking and financial services primarily in Puerto Rico and New York. Current price at $1.28. Net institutional purchases in the current quarter at 11.6M shares, which represents about 11.05% of the company's float of 104.95M shares.

9. USEC Inc. (NYSE:USU): USEC Inc., together with its subsidiaries, supplies low enriched uranium (LEU) to commercial nuclear power plants in the United States and internationally. Current price at $1.23. Net institutional purchases in the current quarter at 6.9M shares, which represents about 6.19% of the company's float of 111.47M shares.

10. Corinthian Colleges Inc. (NASDAQ:COCO): Operates as a post-secondary career education company in the United States and Canada. Current price at $1.68. Net institutional purchases in the current quarter at 3.5M shares, which represents about 4.54% of the company's float of 77.08M shares.

11. AVI Biopharma, Inc. (AVII): Focuses on the discovery and development of RNA-based therapeutics for the treatment of rare and infectious diseases. Current price at $0.97. Net institutional purchases in the current quarter at 13.3M shares, which represents about 10.69% of the company's float of 124.46M shares.

12. Sealy Corporation (NYSE:ZZ): Sealy Corporation, together with its subsidiaries, manufactures and markets various bedding products. Current price at $1.35. Net institutional purchases in the current quarter at 3.0M shares, which represents about 8.46% of the company's float of 35.46M shares.

13. Seacoast Banking Corp. of Florida (NASDAQ:SBCF): Operates as the holding company for Seacoast National Bank that provides various financial products and services in the United States. Current price at $1.44. Net institutional purchases in the current quarter at 2.9M shares, which represents about 3.96% of the company's float of 73.28M shares.

14. The McClatchy Company (NYSE:MNI): Operates as a newspaper publisher in the United States. Current price at $1.47. Net institutional purchases in the current quarter at 9.9M shares, which represents about 20.42% of the company's float of 48.48M shares.

15. Furniture Brands International Inc. (FBN): Designs, manufactures, sources, and retails home furnishings. Current price at $1.94. Net institutional purchases in the current quarter at 3.3M shares, which represents about 6.98% of the company's float of 47.26M shares.

16. Identive Group, Inc. (NASDAQ:INVE): Provides products and solutions in the areas of physical and logical access control, identity management, and radio frequency identification (RFID) to governments, commercial and industrial enterprises, healthcare organizations, and consumers worldwide. Current price at $1.93. Net institutional purchases in the current quarter at 5.7M shares, which represents about 13.04% of the company's float of 43.72M shares.

17. MPG Office Trust, Inc. (NYSE:MPG): Engages in the ownership, management, acquisition, and development of office and real estate properties primarily in California. Current price at $1.99. Net institutional purchases in the current quarter at 4.2M shares, which represents about 10.23% of the company's float of 41.05M shares.

18. Global Ship Lease, Inc. (NYSE:GSL): Engages in owning and chartering out containerships under long term time charters. Current price at $1.87. Net institutional purchases in the current quarter at 844.1K shares, which represents about 7.32% of the company's float of 11.53M shares.

19. Active Power Inc. (NASDAQ:ACPW): Designs, manufactures, and markets critical power quality solutions. Current price at $1.31. Net institutional purchases in the current quarter at 4.4M shares, which represents about 7.03% of the company's float of 62.59M shares.

*Institutional data sourced from Fidelity.

Source: 19 Small Cap Stocks Boosted By Institutional Buying