3 Smart-Money Stock Picks Under $4 On Winning Streaks

|
Includes: BZH, GSS, HOV
by: Kapitall

Are you on the lookout for low-priced stocks with strong price movement? We ran a screen with this in mind.

Finding quality stocks in a low-price range can be difficult, so we started with a universe of names with market caps above $300 million and trading between $1 and $4. Markets trading at these values tend to be less observed than their higher-priced peers, and less scouted by penny stock investors. We feel stocks in this range offer an opportunity to explore a relatively unobserved universe of stocks. High market caps suggest greater stability.

That being said, we wanted to pick out names that are nevertheless on the radar of "big money" investors. So we began screening for stocks with the support of institutional buyers (or "smart money" investors), with significant net institutional purchases in the current quarter.

Next, we looked for stocks showing signs of outperforming the market - which can mean big percentage gains for stocks in the low price range. To do this we screened for stocks on winning streaks, measured by a persistence of days in which the stock outperformed the S&P 500 and little persistence of days in underperforming the index. We measured this by the ratio of the longest winning streak (in days) divided by the longest losing streak over the last month.

Looking at the chart below we see that despite their recent success in the market (list average 1-year return at 90%) and favorable attention from institutions, on average analysts aren't too excited about these names. For an interactive version of this chart, click on the image below. Analyst ratings sourced from Zacks Investment Research.

Tool provided by Kapitall.

Do you think these stocks will continue to win? Use this list as a starting point for your own analysis.

1. Golden Star Resources, Ltd. (NYSEMKT:GSS): Golden Star Resources Ltd., a gold mining and exploration company, through its subsidiaries, engages in the acquisition, exploration, development, and production of gold properties. Market cap at $476.3M, most recent closing price at $1.84. Net institutional purchases in the current quarter at 41.9M shares, which represents about 16.26% of the company's float of 257.75M shares. The stock's average daily alpha vs. the S&P500 index stands at 1.78% (measured close to close, over the last month). During this period, the longest winning streak lasted 9 days (i.e. the stock's daily returns outperformed the S&P 500 for 9 consecutive days). The longest losing streak lasted 3 days (i.e. a win streak / losing streak ratio of 3.).

2. Hovnanian Enterprises Inc. (NYSE:HOV): Engages in homebuilding and financial services businesses in the United States. Market cap at $427M, most recent closing price at $3.63. Net institutional purchases in the current quarter at 22.1M shares, which represents about 20.94% of the company's float of 105.54M shares. The stock's average daily alpha vs. the S&P500 index stands at 1.79% (measured close to close, over the last month). During this period, the longest winning streak lasted 7 days (i.e. the stock's daily returns outperformed the S&P 500 for 7 consecutive days). The longest losing streak lasted 1 day (i.e. a win streak / losing streak ratio of 7.).

3. Beazer Homes USA Inc. (NYSE:BZH): Designs, builds, and sells single-family and multi-family homes in the United States. Market cap at $448.67M, most recent closing price at $3.64. Net institutional purchases in the current quarter at 6.0M shares, which represents about 6.16% of the company's float of 97.34M shares. The stock's average daily alpha vs. the S&P500 index stands at 1.39% (measured close to close, over the last month). During this period, the longest winning streak lasted 5 days (i.e. the stock's daily returns outperformed the S&P 500 for 5 consecutive days). The longest losing streak lasted 2 days (i.e. a win streak / losing streak ratio of 2.5).

Price data sourced from Yahoo! Finance, 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. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.