Hedge Funds Love These Undervalued S&P 500 Stocks

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(List compiled by Becca Lipman. Institutional data from Fidelity, all other data sourced form Finviz.)

These days, investors willing to take a risk are like kids in a candy store. Stocks are cheap, and if the economy rebounds, they'll be happy campers indeed.

"Nearly 100 of the 460 companies in the Standard & Poor's 500 with profit forecasts for 2011 are selling at single-digit price-earnings ratios based on those earnings expectations,"says Matt Krantz of USA Today.


Stocks with PEs under 10 are generally considered undervalued. For some companies this can be the sign of a rough spot in performance.

Yet some analysts think that for many stocks it is only the general distrust in the economy that leaves company's performances underrepresented in the share price.

Hedge funds are taking note. To help you identify the trends of Big Money, we list below the top ten S&P 500 stocks with a P/E below 10 and significant levels of institutional buying over the last quarter.

Big Money thinks the following names are undervalued at current levels - do you agree? Use the list below as a starting point for your own analysis.

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List sorted by net institutional buying as a % of share float.

1. Diamond Offshore Drilling Inc. (DO): Oil & Gas Drilling & Exploration Industry. Market cap of $8.66B. Current price at $62.3. P/E at 9.04. Net institutional shares purchased in the current quarter at 10.4M, equivalent to 15.09% of the company's 68.90M share float. The stock is a short squeeze candidate, with a short float at 9.13% (equivalent to 5.99 days of average volume). The stock has had a couple of great days, gaining 6.24% over the last week.

2. Advanced Micro Devices, Inc. (AMD): Semiconductor Industry. Market cap of $4.24B. Current price at $6.14. P/E at 5.63. Net institutional shares purchased in the current quarter at 33.2M, equivalent to 5.69% of the company's 583.26M share float. This is a risky stock that is significantly more volatile than the overall market (beta = 2.11). The stock has lost 6.54% over the last year.

3. DeVry Inc. (DV): Education & Training Services Industry. Market cap of $3.0B. Current price at $43.58. P/E at 9.49. Net institutional shares purchased in the current quarter at 3.3M, equivalent to 5.34% of the company's 61.77M share float. Might be undervalued at current levels, with a PEG ratio at 0.87, and P/FCF ratio at 11.57. It's been a rough couple of days for the stock, losing 15.74% over the last week.

4. Tesoro Corporation (TSO): Oil & Gas Refining & Marketing Industry. Market cap of $3.0B. Current price at $20.85. P/E at 7.81. Net institutional shares purchased in the current quarter at 6.3M, equivalent to 4.47% of the company's 140.86M share float. The stock has had a couple of great days, gaining 11.74% over the last week. The stock has performed poorly over the last month, losing 12.39%.

5. Discover Financial Services (DFS): Credit Services Industry. Market cap of $13.10B. Current price at $24. P/E at 7.92. Net institutional shares purchased in the current quarter at 22.0M, equivalent to 4.07% of the company's 540.58M share float. Might be undervalued at current levels, with a PEG ratio at 0.75, and P/FCF ratio at 3.7. The stock has had a couple of great days, gaining 9.69% over the last week.

6. Cliffs Natural Resources Inc. (CLF): Steel & Iron Industry. Market cap of $11.0B. Current price at $75.33. P/E at 6.83. Net institutional shares purchased in the current quarter at 5.6M, equivalent to 3.86% of the company's 145.11M share float. This is a risky stock that is significantly more volatile than the overall market (beta = 2.37). The stock has had a couple of great days, gaining 6.22% over the last week. The stock has performed poorly over the last month, losing 25.44%.

7. Humana Inc. (HUM): Health Care Plans Industry. Market cap of $12.39B. Current price at $74.29. P/E at 9.87. Net institutional shares purchased in the current quarter at 6.3M, equivalent to 3.8% of the company's 165.61M share float. The stock has had a couple of great days, gaining 6.57% over the last week.

8. Forest Laboratories Inc. (FRX): Drug Manufacturers Industry. Market cap of $9.46B. Current price at $34.45. P/E at 8.38. Net institutional shares purchased in the current quarter at 8.5M, equivalent to 3.45% of the company's 246.52M share float. The stock has performed poorly over the last month, losing 10.33%.

9. Lincoln National Corp. (LNC): Life Insurance Industry. Market cap of $6.79B. Current price at $22.01. P/E at 6.42. Net institutional shares purchased in the current quarter at 7.4M, equivalent to 2.41% of the company's 307.01M share float. This is a risky stock that is significantly more volatile than the overall market (beta = 2.52). Might be undervalued at current levels, with a PEG ratio at 0.63, and P/FCF ratio at 4.02. The stock has had a couple of great days, gaining 6.48% over the last week.

10. Archer Daniels Midland Company (ADM): Farm Products Industry. Market cap of $18.07B. Current price at $28.33. P/E at 9.11. Net institutional shares purchased in the current quarter at 15.3M, equivalent to 2.4% of the company's 637.39M share float. The stock has had a couple of great days, gaining 8.88% over the last week.



The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.



This article appears in: Investing , Investing Ideas , Stocks


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