Investing 101: Hedge Funds Love These Large Caps With Bullish Option Sentiment

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(List compiled by Becca Lipman and Daniel Guttridge. Options data sourced from Schaeffer’s, all other data sourced from Finviz.)

To create this list we focused on large cap stocks (market caps ranging from $10 Billion to $200 Billion) that are experiencing significant levels of institutional buying.

We then used the Put/Call ratio to sort through the list. All of the stocks mentioned below have a large change in the number of call options relative to put options, i.e. bullish options market sentiment.

Our final list and relevant data can be found below.

Interested in exploring these investing firms further? Let's review.

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. 

Put/Call Ratio: In general, a put option reflects an opinion that the share price of a given stock will fall, while a call option reflects an opinion that the share price of a given stock will rise. The Put/Call ratio is the number of put options relative to the number of call options for a given stock. If there are more put options (a put/call ratio greater than 1), then there are more investors who think that the share price will decrease than there are investors who think that the share price will increase.

Simply put, a high put/call ratio reflects a bearish sentiment about a given stock while a low ratio reflects a bullish sentiment. For this article we focus on stocks with low put call options.

Now that you're armed with information, use the list below as a starting point for your own analysis. Which of these stocks are you most bullish about?

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1. Pepsico, Inc. (PEP): Beverages Drinks Industry. Market cap of $100.81B. Put/call ratio has decreased 12.05% over the last ten trading days (from 0.83 to 0.73). Net institutional purchases over the current quarter at 17.2M, which is 1.09% of the company's 1.58B share float. The stock has gained 1.64% over the last year.

2. Taiwan Semiconductor Manufacturing Co. Ltd. (TSM): Semiconductor Industry. Market cap of $60.85B. Put/call ratio has decreased 13.61% over the last ten trading days (from 1.69 to 1.46). Net institutional purchases over the current quarter at 168.6M, which is 3.97% of the company's 4.25B share float. The stock has gained 28.31% over the last year.

3. Kraft Foods Inc. (KFT): Food Industry. Market cap of $60.44B. Put/call ratio has decreased 17.36% over the last ten trading days (from 1.21 to 1.0). Net institutional purchases over the current quarter at 24.7M, which is 1.49% of the company's 1.66B share float. The stock has gained 21.13% over the last year.

4. Goldcorp Inc. (GG): Gold Industry. Market cap of $39.93B. Put/call ratio has decreased 10.71% over the last ten trading days (from 0.56 to 0.50). Net institutional purchases over the current quarter at 9.7M, which is 1.21% of the company's 801.80M share float. The stock has gained 18.7% over the last year.

5. Southern Company (SO): Electric Utilities Industry. Market cap of $35.36B. Put/call ratio has decreased 33.04% over the last ten trading days (from 1.12 to 0.75). Net institutional purchases over the current quarter at 12.0M, which is 1.40% of the company's 856.60M share float. The stock has gained 18.78% over the last year.

6. VMware, Inc. (VMW): Technical & System Software Industry. Market cap of $35.07B. Put/call ratio has decreased 12.36% over the last ten trading days (from 0.89 to 0.78). Net institutional purchases over the current quarter at 5.1M, which is 6.44% of the company's 79.16M share float. It's been a rough couple of days for the stock, losing 5.82% over the last week.

7. Mosaic Co. (MOS): Specialty Chemicals Industry. Market cap of $30.12B. Put/call ratio has decreased 23.40% over the last ten trading days (from 0.47 to 0.36). Net institutional purchases over the current quarter at 99.3M, which is 22.26% of the company's 446.11M share float. The stock has gained 16.37% over the last year.

8. Danaher Corp. (DHR): Conglomerates Industry. Market cap of $29.63B. Put/call ratio has decreased 25.64% over the last ten trading days (from 0.78 to 0.58). Net institutional purchases over the current quarter at 24.2M, which is 4.25% of the company's 569.67M share float. The stock has performed poorly over the last month, losing 14.25%.

9. Exelon Corp. (EXC): Diversified Utilities Industry. Market cap of $28.51B. Put/call ratio has decreased 14.29% over the last ten trading days (from 0.49 to 0.42). Net institutional purchases over the current quarter at 15.0M, which is 2.27% of the company's 662.09M share float. The stock has gained 13.08% over the last year.

10. Covidien plc (COV): Medical Instruments & Supplies Industry. Market cap of $25.26B. Put/call ratio has decreased 51.15% over the last ten trading days (from 1.31 to 0.64). Net institutional purchases over the current quarter at 211.0M, which is 43.13% of the company's 489.20M share float. The stock has gained 39.41% over the last year.



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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