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Do you like to follow the buying trends of smart money investors like hedge fund managers? For a closer look at stocks that the smart money is buying up, we ran a screen.

We began by screening the healthcare sector for stocks that appear undervalued relative to earnings growth, with PEG below 1.

We then screened these names for those with strong confidence from institutional investors, which include hedge fund managers and mutual fund managers. We screened for stocks seeing significant net institutional purchases over the last quarter, representing at least 5% of share float.

Interactive Chart: Press Play to compare changes in market cap 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 think these stocks should be trading higher? Use this list as a starting point for your own analysis.

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

1. Akorn, Inc. (NASDAQ:AKRX): Engages in the manufacture and marketing of diagnostic and therapeutic pharmaceutical products, hospital drugs, and injectable pharmaceuticals in the United States and internationally. Market cap at $1.13B, most recent closing price at $11.73. PEG at 0.63. Net institutional purchases in the current quarter at 6.6M shares, which represents about 9.42% of the company's float of 70.06M shares.

2. PDL BioPharma, Inc. (NASDAQ:PDLI): Engages in the management of antibody humanization patents and royalty assets, which consist of Queen et al. Market cap at $864.46M, most recent closing price at $6.22. PEG at 0.38. Net institutional purchases in the current quarter at 11.3M shares, which represents about 8.8% of the company's float of 128.43M shares.

3. USANA Health Sciences Inc. (NYSE:USNA): Develops, manufactures, distributes, and sells nutritional and personal care products worldwide. Market cap at $614.59M, most recent closing price at $41.0. PEG at 0.77. Net institutional purchases in the current quarter at 530.2K shares, which represents about 7.65% of the company's float of 6.93M shares.

4. Sun Healthcare Group, Inc. (NASDAQ:SUNH): Provides health care services primarily for senior population in the United States. Market cap at $510.88M, most recent closing price at $6.80. PEG at 0.81. Net institutional purchases in the current quarter at 1.3M shares, which represents about 6.56% of the company's float of 19.81M shares.

5. Questcor Pharmaceuticals, Inc. (QCOR): Provides prescription drugs for central nervous system and inflammatory disorders. Market cap at $2.56B, most recent closing price at $41.40. PEG at 0.88. Net institutional purchases in the current quarter at 3.8M shares, which represents about 6.36% of the company's float of 59.75M shares.

6. Elan Corporation, plc (NYSE:ELN): Operates as a neuroscience-based biotechnology company primarily in Ireland and the United States. Market cap at $8.37B, most recent closing price at $14.29. PEG at 0.29. Net institutional purchases in the current quarter at 28.4M shares, which represents about 5.89% of the company's float of 482.57M shares.

7. Transcend Services, Inc. (TRCR): Provides medical transcription services in the United States. Market cap at $315.54M, most recent closing price at $29.54. PEG at 0.98. Net institutional purchases in the current quarter at 544.2K shares, which represents about 5.81% of the company's float of 9.36M shares.

8. Cigna Corp. (NYSE:CI): Operates as a health service organization. Market cap at $13.85B, most recent closing price at $46.72. PEG at 0.96. Net institutional purchases in the current quarter at 16.2M shares, which represents about 5.67% of the company's float of 285.65M shares.

9. POZEN Inc. (NASDAQ:POZN): Develops products for the treatment of acute and chronic pain, and other pain-related conditions in the United States. Market cap at $237.14M, most recent closing price at $7.95. PEG at 0.18. Net institutional purchases in the current quarter at 1.1M shares, which represents about 5.22% of the company's float of 21.09M shares.

*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.

Source: 9 Undervalued Healthcare Stocks Being Snapped Up By Hedge Funds