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Low-priced stocks can be priced the way they are for many reasons. The specific reason is very important when considering different stocks.

A stock’s price may be low because of company policy, such as a recent stock split or a recent IPO price. Prices can also be low because of bad trading performance. The latter is called a “value trap,” in which a stock’s low price appears attractive but indicates lack of value.

For ideas on how to sort through low-priced stocks, we ran a screen on stocks trading under $5 for those with 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.

Do you agree with hedge funds that these stocks are bargains and not traps? Use this list as a starting point for your own analysis.

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

1. Merge Healthcare Incorporated (NASDAQ:MRGE): Provides health information technology interoperability solutions. Market cap of $447.97M. Price (as of market close on 12/9) at $4.95. Net institutional shares purchased over the current quarter at 6.5M, which is 24.87% of the company's 26.14M share float. The stock is a short squeeze candidate, with a short float at 9.21% (equivalent to 5.36 days of average volume). The stock has performed poorly over the last month, losing 11.45%.

2. Dynavax Technologies Corporation (NASDAQ:DVAX): A clinical-stage biopharmaceutical company, discovers and develops novel products to prevent and treat infectious diseases. Market cap of $369.86M. Price (as of market close on 12/9) at $3.20. Net institutional shares purchased over the current quarter at 10.7M, which is 9.04% of the company's 118.32M share float. This is a risky stock that is significantly more volatile than the overall market (beta = 2.74). The stock is a short squeeze candidate, with a short float at 9.54% (equivalent to 9.38 days of average volume). The stock has had a good month, gaining 16.36%.

3. Newcastle Investment Corp. (NYSE:NCT): Operates as a real estate investment and finance company that invests in and manages a portfolio consisting primarily of real estate securities. Market cap of $482.78M. Price (as of market close on 12/9) at $4.59. Net institutional shares purchased over the current quarter at 9.1M, which is 8.95% of the company's 101.71M share float. This is a risky stock that is significantly more volatile than the overall market (beta = 3.43). The stock has lost 18.18% over the last year.

4. Magnum Hunter Resources Corp. (NYSE:MHR): Engages in the acquisition, development, and production of oil and natural gas primarily in West Virginia, North Dakota, Texas, and Louisiana. Market cap of $592.89M. Price (as of market close on 12/9) at $4.60. Net institutional shares purchased over the current quarter at 10.4M, which is 8.47% of the company's 122.78M share float. The stock has lost 25.32% over the last year.

5. Opko Health, Inc. (NYSE:OPK): Engages in the discovery, development, and commercialization of novel and proprietary technologies primarily in the United States, Chile, and Mexico. Market cap of $1.40B. Price (as of market close on 12/9) at $4.82. Net institutional shares purchased over the current quarter at 8.8M, which is 6.65% of the company's 132.27M share float. The stock is a short squeeze candidate, with a short float at 85.06% (equivalent to 7.37 days of average volume). After a solid performance over the last year, OPK has pulled back during recent sessions. The stock has gained 34.64% over the last year.

6. Dynegy Inc. (NYSE:DYN): Engages in the production and sale of electric energy, capacity, and ancillary services in the United States. Market cap of $368.13M. Price (as of market close on 12/9) at $3.00. Net institutional shares purchased over the current quarter at 4.4M, which is 5.85% of the company's 75.20M share float. The stock has performed poorly over the last month, losing 10.98%.

7. Shanda Games Limited (NASDAQ:GAME): Engages in the development and operation of online games in the People's Republic of China. Market cap of $1.24B. Price (as of market close on 12/9) at $4.38. Net institutional shares purchased over the current quarter at 4.0M, which is 5.70% of the company's 70.22M share float. The stock has lost 29.92% over the last year.

8. Giant Interactive Group, Inc. (NYSE:GA): Develops and operates online games in the People's Republic of China. Market cap of $922.26M. Price (as of market close on 12/9) at $4.01. Net institutional shares purchased over the current quarter at 5.1M, which is 5.31% of the company's 96.09M share float. Offers a good dividend, and appears to have good liquidity to back it up--dividend yield at 4.49%, current ratio at 2.19, and quick ratio at 2.19. The stock has lost 3.84% over the last year.

9. Tanzanian Royalty Exploration Corp. (NYSEMKT:TRX): Engages in the acquisition and exploration of mineral properties in Africa. Market cap of $312.97M. Price (as of market close on 12/9) at $3.13. Net institutional shares purchased over the current quarter at 5.1M, which is 5.28% of the company's 96.52M share float. The stock is a short squeeze candidate, with a short float at 5.66% (equivalent to 5.54 days of average volume). The stock has had a couple of great days, gaining 9.82% over the last week.

10. Abraxas Petroleum Corp. (NASDAQ:AXAS): Engages in the acquisition, development, exploration, and production of oil and gas in the United States and Canada. Market cap of $330.11M. Price (as of market close on 12/9) at $3.58. Net institutional shares purchased over the current quarter at 3.2M, which is 4.10% of the company's 78.10M share float. The stock is a short squeeze candidate, with a short float at 25.73% (equivalent to 14.11 days of average volume). The stock has lost 12.47% over the last year.

11. MEMC Electronic Materials Inc. (WFR): Engages in the development, manufacture, and sale of silicon wafers for the semiconductor industry worldwide. Market cap of $1.02B. Price (as of market close on 12/9) at $4.42. Net institutional shares purchased over the current quarter at 9.2M, which is 4.01% of the company's 229.54M share float. The stock has lost 63.26% over the last year.

12. GenOn Energy, Inc. (GEN): Operates as a generator of wholesale electricity in the United States. Market cap of $2.01B. Price (as of market close on 12/9) at $2.61. Net institutional shares purchased over the current quarter at 27.0M, which is 3.76% of the company's 717.23M share float. The stock has lost 27.09% over the last year.

13. Rubicon Minerals Corporation (NYSEMKT:RBY): Engages in the acquisition, exploration, and development of mineral properties in Canada and the United States. Market cap of $948.38M. Price (as of market close on 12/9) at $3.99. Net institutional shares purchased over the current quarter at 6.2M, which is 2.89% of the company's 214.27M share float. The stock has lost 26.52% over the last year.

14. International Tower Hill Mines Ltd. (NYSEMKT:THM): Engages in the acquisition, exploration, and development of mineral properties in Alaska and Nevada. Market cap of $398.73M. Price (as of market close on 12/9) at $4.60. Net institutional shares purchased over the current quarter at 1.9M, which is 2.78% of the company's 68.32M share float. The stock has performed poorly over the last month, losing 15.29%.

15. DCT Industrial Trust Inc. (NYSE:DCT): Operates as a publicly owned real estate investment trust. Market cap of $1.20B. Price (as of market close on 12/9) at $4.86. Net institutional shares purchased over the current quarter at 6.1M, which is 2.50% of the company's 244.39M share float. The stock is a short squeeze candidate, with a short float at 6.81% (equivalent to 5.04 days of average volume). The stock has lost 1.42% over the last year.

16. Vical Inc. (NASDAQ:VICL): Engages in the research and development of biopharmaceutical products based on its deoxyribonucleic acid (DNA) delivery technologies for the prevention and treatment of serious or life-threatening diseases. Market cap of $329.21M. Price (as of market close on 12/9) at $4.58. Net institutional shares purchased over the current quarter at 1.5M, which is 2.24% of the company's 67.07M share float. The stock is a short squeeze candidate, with a short float at 9.15% (equivalent to 8.28 days of average volume). The stock has had a good month, gaining 26.87%.

17. Augusta Resource Corp. (NYSEMKT:AZC): Engages in the acquisition, exploration, and development of natural mineral resource properties. Market cap of $502.49M. Price (as of market close on 12/9) at $3.51. Net institutional shares purchased over the current quarter at 1.9M, which is 2.15% of the company's 88.42M share float. This is a risky stock that is significantly more volatile than the overall market (beta = 2.21). The stock has lost 11.59% over the last year.

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

Source: 17 Stocks Under $5 Being Bought Up By Hedge Funds