4 Rallying, Highly Profitable Small Caps Hedge Funds Love

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Includes: ATRO, CFNL, MNR, PLOW
by: Kapitall

Do you prefer small-cap stocks over large-caps because of their opportunities for growth? For ideas on how to dig deeper into the small-cap sphere, we ran a screen.

We began with stocks with market caps between $300-500 million, and then screened for those enjoying upward momentum, rallying above their 20-day, 50-day, and 200-day moving averages.

We then screened for those small-caps with impressive profitability, with higher gross, operating, and pretax margins than their industry peers. This indicates that these companies are keeping higher percentages of their revenues as profits, and it may indicate that they have greater control over their cost structure.

Finally, we screened for those with the backing of institutional investors (which include hedge fund and mutual fund managers), seeing significant net institutional purchases over the current quarter.

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

Do you think these names will continue rallying higher as institutional investors expect? Use this list as a starting point for your own analysis.

1. Astronics Corp. (ATRO): Designs and manufactures products for the aerospace and defense industries worldwide. Market cap at $433.22M. The stock is currently rallying 2.54% above its 20-day moving average, 2.69% above its 50-day MA, and 9.13% above its 200-day MA. Net institutional purchases in the current quarter at 565.0K shares, which represents about 5.71% of the company's float of 9.90M shares. TTM gross margin at 28.68% vs. industry average at 25.28%. TTM operating margin at 14.6% vs. industry average at 11.66%.TTM pretax margin at 12.72% vs. industry average at 8.27%.

2. Cardinal Financial Corp. (CFNL): Operates as the holding company for Cardinal Bank that provides banking products and services to commercial and retail customers in Virginia and greater Washington, D. Market cap at $330.25M. The stock is currently rallying 1.53% above its 20-day moving average, 1.64% above its 50-day MA, and 7.97% above its 200-day MA. Net institutional purchases in the current quarter at 1.8M shares, which represents about 6.82% of the company's float of 26.38M shares. TTM gross margin at 77.68% vs. industry average at 68.74%. TTM operating margin at 50.38% vs. industry average at 39.24%.TTM pretax margin at 30.7% vs. industry average at 21.42%.

3. Monmouth Real Estate Investment Corp. (MNR): Is a real estate investment trust. It owns, manages, and leases properties to investment-grade tenants on long-term leases. Market cap at $387.22M. The stock is currently rallying 2.25% above its 20-day moving average, 3.58% above its 50-day MA, and 15.39% above its 200-day MA. Net institutional purchases in the current quarter at 3.1M shares, which represents about 8.2% of the company's float of 37.81M shares. TTM gross margin at 53.49% vs. industry average at 41.54%. TTM operating margin at 53.49% vs. industry average at 39.24%.TTM pretax margin at 27.53% vs. industry average at 19.43%.

4. Douglas Dynamics, Inc. (PLOW): Designs, manufactures, and sells snow and ice control equipment for light trucks in North America. Market cap at $300.75M. The stock is currently rallying 4.41% above its 20-day moving average, 3.57% above its 50-day MA, and 0.10% above its 200-day MA. Net institutional purchases in the current quarter at 1.3M shares, which represents about 6.36% of the company's float of 20.43M shares. TTM gross margin at 35.82% vs. industry average at 32.1%. TTM operating margin at 19.75% vs. industry average at 13.54%.TTM pretax margin at 14.55% vs. industry average at 11.6%.

*Institutional and profitability 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.