Underestimated Stocks: Hedge Funds Missed Out on These 9 Winning Streaks

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(Written by Alexander Crawford, list compiled by Eben Esterhuizen, CFA. Data from 11/14. Institutional data sourced from Fidelity, price data sourced from Yahoo! Finance.)

Analyzing the buying trends of “big money” investors like hedge funds becomes especially interesting when compared with price performance. Have hedge funds been making winning positions? If not, it opens up the question of whether hedge funds have been wrong, or whether they know something the market hasn’t yet realized.

Winning streaks are one interesting angle to consider price performance.

Stocks with a persistence of days in which they recently outperformed the S&P 500 and little persistence in recently underperforming the S&P 500 benchmark are very likely surrounded by positive market sentiment.

The Screen

To use these concepts, we ran a screen on recently “winning” stocks: those that have seen a persistence of days in which the stock beat the S&P 500 benchmark over the last month and little persistence in underperforming the S&P 500, i.e. long winning streaks and short losing streaks, as measured by a ratio of the longest winning streak to the longest losing streak.

We screened these winners for those seeing the opposite sentiment (bearishness) from institutional investors like hedge funds, with significant net institutional selling over the current quarter.

Clearly hedge funds disagree with the broader market – do you think hedge funds are wrong, or do they know something the market hasn’t yet priced in?

Use this list as a starting point for your own analysis.

Analyze These Ideas (Tools Will Open In A New Window)

1. Access a thorough description of all companies mentioned
2. Compare analyst ratings for all stocks mentioned below
3. Visualize annual returns for all stocks mentioned

List sorted alphabetically.

1. AMERIGROUP Corporation (AGP): Operates as a multi-state managed healthcare company. Net institutional sales in the current quarter at 3.1M shares, which represents about 6.65% of the company's float of 46.65M shares. The stock's average daily alpha vs. the S&P500 index stands at 1.47% (measured close to close, over the last month). During this period, the longest winning streak lasted 4 days (i.e. the stock's daily returns outperformed the S&P 500 for 4 consecutive days). The longest losing streak lasted 1 day (i.e. a win streak / losing streak ratio of 4.).

2. American Reprographics Co. (ARC): Provides business-to-business document management services. Net institutional sales in the current quarter at 2.0M shares, which represents about 6.24% of the company's float of 32.05M shares. The stock's average daily alpha vs. the S&P500 index stands at 0.76% (measured close to close, over the last month). During this period, the longest winning streak lasted 5 days (i.e. the stock's daily returns outperformed the S&P 500 for 5 consecutive days). The longest losing streak lasted 2 days (i.e. a win streak / losing streak ratio of 2.5).

3. CECO Environmental Corp. (CECE): Engages in engineering, designing, building, and installing systems that capture, clean, and destroy airborne contaminants from industrial facilities, as well as equipment that controls emissions from such facilities primarily in the United States and Canada. Net institutional sales in the current quarter at 453.0K shares, which represents about 5.37% of the company's float of 8.43M shares. The stock's average daily alpha vs. the S&P500 index stands at 0.76% (measured close to close, over the last month). During this period, the longest winning streak lasted 7 days (i.e. the stock's daily returns outperformed the S&P 500 for 7 consecutive days). The longest losing streak lasted 2 days (i.e. a win streak / losing streak ratio of 3.5).

4. CoreLogic, Inc. (CLGX): Provides property, financial, and consumer information, analytics, and services to mortgage originators and servicers, financial institutions, government and government-sponsored enterprises, and other businesses in the United States. Net institutional sales in the current quarter at 11.7M shares, which represents about 12.28% of the company's float of 95.24M shares. The stock's average daily alpha vs. the S&P500 index stands at 0.88% (measured close to close, over the last month). During this period, the longest winning streak lasted 6 days (i.e. the stock's daily returns outperformed the S&P 500 for 6 consecutive days). The longest losing streak lasted 2 days (i.e. a win streak / losing streak ratio of 3.).

5. FEI Co. (FEIC): Supplies instruments for nanoscale imaging, analysis, and prototyping that enable research, development, and manufacturing in industrial, academic, and research institutional applications. Net institutional sales in the current quarter at 1.4M shares, which represents about 4% of the company's float of 34.98M shares. The stock's average daily alpha vs. the S&P500 index stands at 0.96% (measured close to close, over the last month). During this period, the longest winning streak lasted 6 days (i.e. the stock's daily returns outperformed the S&P 500 for 6 consecutive days). The longest losing streak lasted 2 days (i.e. a win streak / losing streak ratio of 3.).

6. Furiex Pharmaceuticals, Inc. (FURX): Engages in the compound partnering business in the United States and Europe. Net institutional sales in the current quarter at 345.1K shares, which represents about 4.87% of the company's float of 7.09M shares. The stock's average daily alpha vs. the S&P500 index stands at 1.06% (measured close to close, over the last month). During this period, the longest winning streak lasted 5 days (i.e. the stock's daily returns outperformed the S&P 500 for 5 consecutive days). The longest losing streak lasted 2 days (i.e. a win streak / losing streak ratio of 2.5).

7. Stream Global Services, Inc. (SGS): Operates as a global business process outsourcing service provider. Net institutional sales in the current quarter at 35.8M shares, which represents about 61.58% of the company's float of 58.14M shares. The stock's average daily alpha vs. the S&P500 index stands at 1.7% (measured close to close, over the last month). During this period, the longest winning streak lasted 7 days (i.e. the stock's daily returns outperformed the S&P 500 for 7 consecutive days). The longest losing streak lasted 2 days (i.e. a win streak / losing streak ratio of 3.5).

8. Spreadtrum Communications Inc. (SPRD): Operates as a fabless semiconductor company that designs, develops, and markets baseband processor and RF transceiver solutions for wireless communications and mobile television markets. Net institutional sales in the current quarter at 6.0M shares, which represents about 17.75% of the company's float of 33.80M shares. The stock's average daily alpha vs. the S&P500 index stands at 1.3% (measured close to close, over the last month). During this period, the longest winning streak lasted 7 days (i.e. the stock's daily returns outperformed the S&P 500 for 7 consecutive days). The longest losing streak lasted 2 days (i.e. a win streak / losing streak ratio of 3.5).

9. Telestone Technologies Corp. (TSTC): Offers wireless local-access network technologies and solutions primarily in the People's Republic of China. Net institutional sales in the current quarter at 333.5K shares, which represents about 3.73% of the company's float of 8.93M shares. The stock's average daily alpha vs. the S&P500 index stands at 2.41% (measured close to close, over the last month). During this period, the longest winning streak lasted 7 days (i.e. the stock's daily returns outperformed the S&P 500 for 7 consecutive days). The longest losing streak lasted 2 days (i.e. a win streak / losing streak ratio of 3.5). 



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 , US Markets


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