Contrarian Ideas: Hedge Funds Are Selling These 10 Stocks Trading Below Target Price
Do you consider the buying trends of “smart money” investors when comparing stocks? We ran a screen with this idea in mind.
Discount to Target Price
We ran a screen of all stocks with market caps above $50 million trading below their analyst price. Analyst target prices can be very useful guides for investors. The target price is a price level set by analysts that, based on their data and estimates, represents their predictions for that company in the upcoming year. When a company’s current market price is deeply lagging to the target price, it may signal that the company has more value to price in (the stock price may rise).
We explore this idea by forming a universe of companies that are currently undervalued to target price. All stocks have a minimum of 5 analysts ratings. And because analysts often have different opinions and tend to be overly optimistic, we use the lowest analyst target price.
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Net Institutional Selling
We then screened for names with bearish sentiment from institutional investors, with significant net institutional sales over the last quarter representing at least 5% of share float. This indicates that institutional investors such as hedge fund managers and mutual fund managers expect these names to underperform in the future, despite already trading at a discount to target price.
Business Section: Investing Ideas
As a recap, these are the criteria for our screens:
- Market cap above $50 million
- Trading below lowest analyst target price
- Seeing significant net selloff from hedge fund managers
We were left with 10 stocks. The companies are listed below in detail.