Analysts like to follow what institutional investors (like hedge fund managers) buy because they have access to sophisticated research and have a lot of experience in choosing investments. When they start buying a stock, it’s a signal to take a second look.
We ran a screen on the stocks of the S&P 500 paying dividend yields above 1% and sustainable payout ratios below 50% 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 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.
Do you agree with hedge funds on these names? Use this list as a starting-off point for your own analysis.
List sorted by net institutional shares purchased as a percent of share float.
1. Covidien plc (COV): Develops, manufactures, and sells healthcare products for use in clinical and home settings in the United States and internationally. Market cap of $23.40B. Dividend yield at 1.90%, payout ratio at 21.92%. Net institutional shares purchased over the current quarter at 190.3M, which is 38.90% of the company's 489.20M share float. The stock has had a couple of great days, gaining 8.04% over the last week.
2. TE Connectivity Ltd. (TEL): Provides engineered electronic components, network solutions, specialty products, and subsea telecommunication systems. Market cap of $15.90B. Dividend yield at 1.96%, payout ratio at 24.72%. Net institutional shares purchased over the current quarter at 158.1M, which is 36.56% of the company's 432.41M share float. The stock has had a couple of great days, gaining 10.18% over the last week.
3. Medtronic, Inc. (MDT): Manufactures and sells device-based medical therapies worldwide. Market cap of $36.98B. Dividend yield at 2.77%, payout ratio at 31.71%. Net institutional shares purchased over the current quarter at 81.1M, which is 7.72% of the company's 1.05B share float. The stock has lost 0.62% over the last year.
4. Cliffs Natural Resources Inc. (CLF): Produces iron ore pellets, lump and fines iron ore, and metallurgical coal products. Market cap of $10.15B. Dividend yield at 1.61%, payout ratio at 6.39%. Net institutional shares purchased over the current quarter at 8.4M, which is 5.79% of the company's 145.11M share float. This is a risky stock that is significantly more volatile than the overall market (beta = 2.45). The stock has recently rebounded, and is currently trading 20.71% above its SMA20 and 7.09% above its SMA50. However, the stock still trades 14.53% below its SMA200. The stock has had a couple of great days, gaining 17.68% over the last week.
5. The Sherwin-Williams Company (SHW): Engages in the development, manufacture, distribution, and sale of paints, coatings, and related products primarily in North and South America, the Caribbean region, Europe, and Asia. Market cap of $8.83B. Dividend yield at 1.76%, payout ratio at 31.62%. Net institutional shares purchased over the current quarter at 3.9M, which is 4.44% of the company's 87.93M share float. The stock has had a couple of great days, gaining 7.41% over the last week.
6. MeadWestvaco Corporation (MWV): Provides packaging solutions to the healthcare, personal care and beauty, food, beverage, home and garden, tobacco, and commercial print industries worldwide. Market cap of $4.99B. Dividend yield at 3.42%, payout ratio at 49.05%. Net institutional shares purchased over the current quarter at 7.0M, which is 4.37% of the company's 160.12M share float. The stock has had a couple of great days, gaining 9.79% over the last week.
*Institutional data sourced from Fidelity, 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.
