3 Stocks that Institutions Love
Michael is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
RPX CORP (NASDAQ: RPXC)
% Change of Institutional Ownership vs. Prior Qtr = +48.13%
Rational Patent, which I previously wrote about here, is an intriguing investment opportunity. Considering that the market median for percent change in institutional ownership vs. prior quarter is only +.47%, the +48.13% change for RPXC is significant. Because RPXC was already fairly heavily owned by intuitions (45% institutional ownership) this boost is legitimate. Although RPXC’s relative strength vs. the S&P 500 over the past 13 weeks is only 47, shares have rebounded 10.37% over the past four weeks. My guess is that shares continue to rebound and new institutional buyers will be rewarded for their confidence in RPXC.
LinkedIn (NYSE: LNKD)
% Change of Institutional Ownership vs. Prior Qtr = +36.16%
LinkedIn looks as if it could be on a meteoric rise for the rest of the year. LinkedIn has outperformed 92% of the S&P 500 over the past 13 weeks and does not look to be slowing down. A surface level analysis of LNKD indicates that shares are overvalued because of a monstrous PEG ratio of 12.53 (over two is considered very overvalued) and an 18.29% increase in shares held short. However, neither of the aforementioned metrics bothers me too much. In fact, I believe the increase in institutional ownership carries more weight in terms of a bull vs. bear case. A 3-5 year EPS growth estimate of over 65% indicates that analysts have no idea how fast LNKD is going to grow, which basically makes the PEG ratio useless for any serious analysis. And despite a large increase in short interest, only 5.29% of LNKD’s total outstanding shares are held short. Lastly, the day-to-cover ratio is .9. This shows that although short sellers are taking a risk by shorting the stock, they will be able to get out of their positions fairly quickly (no short squeeze potential). In the end, LNKD has A LOT of momentum and investors are terrified to short it. My bet is that LNKD keeps skyrocketing.
IPG PHOTONICS CORP (NASDAQ: IPGP)
% Change of Institutional Ownership vs. Prior Qtr = +16.51%
Anyone who is shorting this stock should be terrified. Considering that I have some of my personal money in IPGP, I am totally fine with that! The short sellers have had fun with IPGP as of late because the stock has underperformed 77% of the S&P 500 over the past 13 weeks. It looks like the short sellers’ ride could be over. Yes, IPGP is a huge short squeeze candidate. Below are a couple characteristics that are setting IPGP for a big price jump:
- Institutional ownership is increasing
- Increase of Investor confidence
- Days to cover ratio is over 10
- Short sellers could be scrambling to get out of their positions.
- PEG ratio is .69
- IPGP appears to be heavily undervalued according to traditional growth and valuation metrics.
- IPGP shares have performed well year-to-date
- Shares have fairly positive momentum
- IPGP is financially strong
- A huge increase in share price would be justified by traditional valuation metrics.
Calinvestments has a position in IPG Photonics. The Motley Fool owns shares of IPG Photonics and LinkedIn. Motley Fool newsletter services recommend IPG Photonics and LinkedIn. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.If you have questions about this post or the Fool’s blog network, click here for information.