Skeptical Hedge Funds Are Increasingly Bullish And Ready to Trade

Skeptical Hedge Funds Are Increasingly Bullish And Ready to Trade

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Hedge funds are no longer willing to stand on the sidelines: Bloomberg reports they have been jumping into the market and buying up the most stocks since 2010. Better yet, they've become increasingly bullish. (STAY AHEAD OF THE CURVE: Follow Kapitall on Twitter)

"A gauge of hedge-fund bullishness measuring the proportion of bets that shares will rise climbed to 48.6 last week from 42 at the end of November 2011, the biggest increase since April 2010, according to data compiled by the International Strategy & Investment Group."

Those numbers, 48.6 and 42, are from the International Strategy & Investment Group index, which tracks net hedge fund exposure on a zero through 100 scale. Readings above 50 represent bullish bets, while readings below are increasingly bearish.

Bulls believe hedge funds' increased fervor for the market, and high cash inflows, will help the rally continue its push upwards.

A note of caution: Bears suggest "capitulating hedge funds are further evidence that equities have risen too far, too fast as economic growth remains sluggish, warning that the pool of potential buyers is being depleted." 

Business Section: Investing Ideas

So, which companies have seen the most bullish attention from hedge funds? We screened for just that on the stocks in the Standard & Poor 500 index using net purchase data from the current quarter.

Next, to narrow down out selection, we looked for companies that appear more profitable than their industry competitors based on gross, operating, and pretax profit margins.

So what do you think? Is heightened bullish interest from institutional investors going to push the value of these names higher?

 

Interactive Chart: Use the Compar-O-Matic to compare market caps for the stocks mentioned below:

 

“1. Akamai Technologies Inc. (AKAM, Earnings, Analysts, Financials): Provides services for accelerating and improving the delivery of content and applications over the Internet in the United States and internationally. Net institutional purchases in the current quarter at 10.3M shares, which represents about 5.97% of the company's float of 172.46M shares. TTM gross margin at 80.69% vs. industry average at 69.57%. TTM operating margin at 25.56% vs. industry average at 24.94%. TTM pretax margin at 26.52% vs. industry average at 15.7%.

 

“2. Aon Corporation (AON, Earnings, Analysts, Financials): Provides risk management, insurance and reinsurance brokerage, and human resource consulting and outsourcing services in the United States and internationally. Net institutional purchases in the current quarter at 11.2M shares, which represents about 3.46% of the company's float of 323.53M shares. TTM gross margin at 20.83% vs. industry average at 14.19%. TTM operating margin at 15.67% vs. industry average at 11.29%. TTM pretax margin at 12.26% vs. industry average at 8.62%.

 

“3. Apollo Group Inc. (APOL, Earnings, Analysts, Financials): Provides educational programs and services at the undergraduate, master's, and doctoral levels. Net institutional purchases in the current quarter at 5.6M shares, which represents about 4.96% of the company's float of 112.93M shares. TTM gross margin at 61.29% vs. industry average at 52.67%. TTM operating margin at 23.27% vs. industry average at 20.54%. TTM pretax margin at 17.69% vs. industry average at 17.41%.

 

“4. Cisco Systems, Inc. (CSCO, Earnings, Analysts, Financials): Designs, manufactures, and sells Internet protocol (IP)-based networking and other products related to the communications and information technology industry worldwide. Net institutional purchases in the current quarter at 162.7M shares, which represents about 3.02% of the company's float of 5.38B shares. TTM gross margin at 66.07% vs. industry average at 59.57%. TTM operating margin at 21.66% vs. industry average at 19.16%. TTM pretax margin at 19.32% vs. industry average at 19.15%.

 

“5. Nicor Inc. (GAS, Earnings, Analysts, Financials): Engages in natural gas distribution business in the United States. Net institutional purchases in the current quarter at 22.1M shares, which represents about 18.96% of the company's float of 116.54M shares. TTM gross margin at 29.68% vs. industry average at 22.97%. TTM operating margin at 21.73% vs. industry average at 13.84%. TTM pretax margin at 13.3% vs. industry average at 10.99%.

 

“6. M&T Bank Corp. (MTB, Earnings, Analysts, Financials): Operates as the holding company for M&T Bank and M&T Bank, National Association that provide commercial and retail banking services to individuals, corporations and other businesses, and institutions. Net institutional purchases in the current quarter at 4.2M shares, which represents about 3.64% of the company's float of 115.37M shares. TTM gross margin at 84.4% vs. industry average at 72.13%. TTM operating margin at 46.47% vs. industry average at 40.05%. TTM pretax margin at 28.41% vs. industry average at 22.31%.

 

“7. Pinnacle West Capital Corporation (PNW, Earnings, Analysts, Financials): Provides retail and wholesale electric services primarily in the State of Arizona. Net institutional purchases in the current quarter at 3.5M shares, which represents about 3.21% of the company's float of 108.89M shares. TTM gross margin at 36.21% vs. industry average at 26.7%. TTM operating margin at 23.03% vs. industry average at 18.27%. TTM pretax margin at 16.64% vs. industry average at 13.53%.

 

 

(Written by Rebecca Lipman. Data sourced from Fidelity.)

 

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