6 Stocks Under $5 That Hedge Funds Are Buying

Institutional buying is a popular way of evaluating a stock without having to go through a company's fundamentals in detail. It is simply an indicator of how many mutual funds, endowments, hedge funds, and so on, have purchased the stock in the last quarter. However like any stock screen, it comes with its caveats.

Generally, when lots of institutional investors are buying up a stock, it means that the company's prospects look sound and that they expect future growth. However this doesn't necesarily mean that the stock is going to be a good deal. Sometimes, when large blocks of shares are purchased at once, the price of a stock can be driven way up. Mutual funds especially have a high turnover rate in their portfolios, so when the shares get sold again the price can just as easily plummit back down - seemingly for no good reason.

The greater the percentage of a company's float that's held up in institutional portfolios, the greater the possibility that these price fluctuations can happen. We decided to screen for bargain-level stocks with the potential for large swings in price. Starting with a universe of stocks being bought by hedge funds and other institutional investors, we searched for those trading under $5. Next, we limited our results to companies which experienced net institutional buying of at least a million shares, and had an average analyst rating of 'buy'.

We were left with six companies on our list.

The List

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1. BG Medicine, Inc. (BGMD, Earnings, Analysts, Financials):Engages in the development and commercialization of novel cardiovascular diagnostic tests to address unmet medical needs in the United States.

Net institutional purchases in the current quarter at 1.7M shares, which represents about 11.83% of the company's float of 14.37M shares. Top holders of the stock are Austin W. Marxe & David M. Greenhouse (7.25%) and Legg Mason Capital Management, Inc. (5.85%).

 

 

2. Cardica Inc. (CRDC, Earnings, Analysts, Financials):Engages in the design, manufacture, and marketing of automated anastomotic systems for use by cardiac surgeons to perform coronary bypass surgery.

Net institutional purchases in the current quarter at 9.3M shares, which represents about 27.05% of the company's float of 34.38M shares. The top holders of the stock are Broadfin Capital, LLC (8.39%) and Primecap Management Company (5.09%).

 

 

3.Full House Resorts Inc. (FLL, Earnings, Analysts, Financials):Develops, manages, invests in, and owns gaming-related enterprises. Market cap at $51.67M, most recent closing price at $2.76.

Net institutional purchases in the current quarter at 1.0M shares, which represents about 5.99% of the company's float of 16.7M shares. Net institutional purchases in the current quarter at 1.0M shares, which represents about 5.99% of the company's float of 16.7M shares. The top holders of the stock are Austin W. Marxe & David M. Greenhouse (9.62%) and RMB Capital Management, LLC (6.21%).

 

 

4. Parkervision Inc. (PRKR, Earnings, Analysts, Financials):Engages in the design, development, and sale of radio frequency technologies and products. Market cap at $381.73M, most recent closing price at $4.58.

Net institutional purchases in the current quarter at 4.7M shares, which represents about 6.41% of the company's float of 73.37M shares. Top holders of the stock are Austin W. Marxe & David M. Greenhouse (7.63%) and Del Mar Asset Management, LP (5.67%).

 

5. Rentech, Inc. (RTK, Earnings, Analysts, Financials):Provides alternative and clean energy solutions; and manufactures and sells nitrogen fertilizer products. Market cap at $495.49M, most recent closing price at $2.20.

Net institutional purchases in the current quarter at 19.0M shares, which represents about 9.12% of the company's float of 208.43M shares. Top holders of the stock are The Vanguard Group, Inc. (6.85%) and Park West Asset Management LLC (4.45%).

 

 

6. Towerstream Corporation (TWER, Earnings, Analysts, Financials):Towerstream Corporation, a 4G service provider, delivers high-speed wireless Internet access. Market cap at $193M, most recent closing price at $3.14.

Net institutional purchases in the current quarter at 10.4M shares, which represents 16.82% of the company's float of 61.82M shares. Top holders of the stock are FMR, LLC (9.74%) and Columbia Wanger Asset Management, L.P. (4.22%).

 

 

(List compiled by James Dennin. User analyst ratings sourced from Zacks Investment Research, all other data sourced from Finviz.)

 

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Analyze These Ideas: Getting Started

Read descriptions for all companies mentioned Access a performance overview for all stocks in the list Compare analyst ratings for the companies mentioned Compare analyst ratings to annual returns for stocks mentioned Real-Time Opinion: Scan the latest tweets about these companies (feed will open in a new window)

Dig Deeper: Access Company Snapshots, Charts, Filings

BG Medicine, Inc.(BGMD, Chart, Download SEC Filings) Cardica Inc.(CRDC, Chart, Download SEC Filings) Full House Resorts Inc.(FLL, Chart, Download SEC Filings) Parkervision Inc.(PRKR, Chart, Download SEC Filings) Rentech, Inc.(RTK, Chart, Download SEC Filings) Towerstream Corporation(TWER, Chart, Download SEC Filings)

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