Funds like these 3 construction stocks as manufacturing picks up


By James Dennin for Kapitall.

Industrial production rose about 0.2% this month, rounding out the strongest quarter in almost four years. Over the quarter, production at factories, utilities, and mines grew at an annualized rate of 5.5%, the highest since 2010

A lot of the growth has come from a resurgent auto sector. When families buy more cars, it drives up demand for aluminum, component parts, and factory equipment. The gain in automobile manufacturing output was its largest in eight years. 

The Institute for Supply Management's Factory index still signals expansion and is mostly unchanged near a five-month high. 

In the event that manufacturing continues to gain speed going into the rest of the year, we decided to screen industrial goods stocks. 

To do that, we started with a list of the entire industrial goods sector, and then built a list of stocks with a  price-to-equity (P/E) ratio below 20 , indicating that the stock isn't trading at a large premium. 

Next, we screened for stocks that had spikes in instutional buying from groups like pensions and hedge funds. Since the managers of these funds often have access to the best information, these spikes in purchasing are often seen as a catalyst for stock moves. 

This left us with three industrial stocks on our list, all working in housing and construction. Do you think the market will continue to grow? Use the list below to begin your analysis, and let us know what you think in the comments. 

Click on the interactive chart to view data over time. 

1. MDC Holdings Inc.  ( MDCEarningsAnalystsFinancials ): Engages in homebuilding and financial services businesses in the United States. Market cap at $1.43B, most recent closing price at $29.23.  

Net institutional purchases in the current quarter at 3.9M shares, which represents about 11.29% of the company's float of 34.55M shares. Major holder: State Street Corporation at a 6.97% stake.

P/E at 4.75.

2. Meritage Homes Corporation ( MTH , Earnings , Analysts , Financials ): Engages in designing and building single-family attached and detached homes in the southern and western United States. Market cap at $1.64B, most recent closing price at $42.01.  

Net institutional purchases in the current quarter at 4.1M shares, which represents about 11.89% of the company's float of 34.49M shares. Major holder: BlackRock Fund Advisors at a 8.34% stake.

P/E at 11.70.

3. PGT, Inc. ( PGTI , Earnings , Analysts , Financials ): Engages in the manufacture and sale of windows and doors. Market cap at $387.76M, most recent closing price at $8.21.  

Net institutional purchases in the current quarter at 6.7M shares, which represents about 15.74% of the company's float of 42.57M shares. Major holder: Renaissance Technologies, LLC at a 5.91% stake.

P/E at 16.53.

(List compiled by James Dennin. Monthly returns sourced from Zacks Investment Research, institutional purchasing data sourced from Fidelity.)

Kapitall Wire is a division of New Kapitall Holdings, LLC. Kapitall Generation, LLC is a wholly owned subsidiary of New Kapitall Holdings, LLC. Kapitall Wire offers free investing ideas, intended for educational information purposes only. It should not be construed as an offer to buy or sell securities, or any other product or service provided by New Kapitall Holdings, LLC, and its affiliate companies.

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This article appears in: Investing , Stocks

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