Investing 101: Big Money Managers Think These Stocks Are Ready for a Rebound

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(List compiled by Eben Esterhuizen, CFA)

With the stock market in meltdown mode, there are several bargains for long-term investors. With this in mind, we wanted to identify a list of stocks trading near 52-week lows that have seen significant institutional buying.

In addition to this, we wanted to identify companies that have seen an increase in their projected earnings over the last 30 days. 

Not sure on the meaning of these terms? Not to fear, let's explain each term in detail...

New 52-Week Low:

The 52-Week Low is the lowest price paid for a share of a given stock in the last 52 weeks (one year).

EPS Projections Mismatched vs. Price Action:

Earnings Per Share (EPS) is the amount of profit that is allotted to each share of a company after dividends have been paid out. Higher EPS and faster EPS growth are both positive signs of profitability.

EPS = (Net Income - Dividends)/(Outstanding Shares)

Price-to-EPS is one of the most widely-used financial ratios (see P/E Ratios). Although P/E values are not constant over time, if EPS is rising faster than price, then the P/E ratio is falling, which could be a sign that the stock is undervalued.

Institutional Buying:

Institutional investors are also known as "big money" investors or managers. They represent big pools of money such as investment banks, pension funds, mutual funds, hedge funds, endowment funds, etc. When they invest in stocks, they can invest hundreds of thousands of dollars or more at one time. These transactions, called "block trades," can have a significant effect on share prices.

Because institutional investors handle such large amounts of money, it is easy enough to assume that the big money managers know what they are doing -- or at the very least know more than the average investor. This is why these investors are also sometimes referred to as "smart money."

If institutional investors start investing in a company, regular investors can assume that some of the most talented analysts and money managers expect the company's share prices to increase over time. The stocks on our list are experiencing significant investment from big money.

Now that you're familiar with the terminology, let's analyze the list:

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1. Nexen Inc. (NXY): Operates as an independent energy company worldwide. Net institutional purchases in the current quarter at 22.4M shares, which represents about 4.26% of the company's float of 525.53M shares. The EPS estimate for the company's current year increased from 2.02 to 2.07 over the last 30 days, an increase of 2.48%. This increase came during a time when the stock price changed by -23.54% (from 20.26 to 15.49 over the last 30 days).

2. Diamond Offshore Drilling Inc. (DO): Operates as an offshore oil and gas drilling contractor worldwide. Net institutional purchases in the current quarter at 8.3M shares, which represents about 12.05% of the company's float of 68.90M shares. The EPS estimate for the company's current year increased from 6.31 to 6.32 over the last 30 days, an increase of 0.16%. This increase came during a time when the stock price changed by -10.66% (from 61.27 to 54.74 over the last 30 days).

3. Penn West Petroleum Ltd. (PWE): Engages in acquiring, exploring, developing, exploiting, and holding interests in petroleum and natural gas properties and related assets in North America. Net institutional purchases in the current quarter at 26.4M shares, which represents about 5.94% of the company's float of 444.22M shares. The EPS estimate for the company's current year increased from 1.4 to 1.46 over the last 30 days, an increase of 4.29%. This increase came during a time when the stock price changed by -16.79% (from 17.75 to 14.77 over the last 30 days).

4. NYSE Euronext, Inc. (NYX): Operates securities exchanges. Net institutional purchases in the current quarter at 10.1M shares, which represents about 3.86% of the company's float of 261.37M shares. The EPS estimate for the company's current year increased from 2.54 to 2.61 over the last 30 days, an increase of 2.76%. This increase came during a time when the stock price changed by -7.37% (from 25.09 to 23.24 over the last 30 days).

5. SL Green Realty Corp. (SLG): Engages in the property management, acquisitions, financing, development, construction, and leasing. Net institutional purchases in the current quarter at 2.6M shares, which represents about 3.08% of the company's float of 84.48M shares. The EPS estimate for the company's current year increased from 4.77 to 4.8 over the last 30 days, an increase of 0.63%. This increase came during a time when the stock price changed by -14.55% (from 68.05 to 58.15 over the last 30 days).

6. Arch Coal Inc. (ACI): Engages in the production and sale of steam and metallurgical coal from surface and underground mines located throughout the United States As of December 31, 2010, it operated or contracted out the operation of 23 active mines; and owned or controlled approximately 4. Net institutional purchases in the current quarter at 33.9M shares, which represents about 16.% of the company's float of 211.86M shares. The EPS estimate for the company's current year increased from 2.01 to 2.02 over the last 30 days, an increase of 0.5%. This increase came during a time when the stock price changed by -21.91% (from 18.67 to 14.58 over the last 30 days.



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

Referenced Stocks: DO , NXY , NYX , PWE , SLG , ACI

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