Investing 101: Rallying Health Care Stocks Being Snapped Up by the Smart Money

Looking to go with the trend while getting exposure to the health care sector? If so, then this may be an interesting starting point for your own analysis.

To construct this list, we looked for stocks with the following characteristics:

  • Health care related with market cap of over $300M
  • Trading above the 20-, 50-, 200-day moving averages
  • Experienced significant institutional buying over the current quarter

Our top 10 results, sorted by institutional buying, are listed below along with relevant data.

Want to review the key terms and their implications before diving in? No problem:

Market Capitalization (market cap): Market capitalization, commonly referred to as market cap, is the total market value of a company's outstanding shares. It can be thought of as a measure of company's size. It can be calculated by multiplying the number of shares by the current price of the shares. Companies with higher market cap are considered to have more trustworthy information because they have greater histories of profitability and data.

Rallying: When a stock is rallying it means it is performing above its moving average for a given time period. It is presented as a % of performance relative to the average. When a stock is performing above its 20-day moving average (MA) as well as its 50 and 200 day moving averages, it signals bullish momentum. All the stocks in this list are rallying above their 20, 50, and 200-day MA.

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.

Now that you're armed with information, use the list below as a starting-off point for your own analysis. Do you think these rallying health care stocks will continue to trade higher? (Click here to access free, interactive tools to analyze these ideas.)

1. Pharmacyclics (Nasdaq: PCYC  ) : Drug Manufacturers Industry. Market cap of $711.07M. The stock is currently trading at 11.77% above its 20-Day SMA, 5.73% above its 50-Day SMA, and 59.41%. Net institutional shares purchased over the current quarter at 8.7M, which is 21.89% of the company's 39.74M share float. The stock has had a couple of great days, gaining 11.22% over the last week.

2. Akorn (Nasdaq: AKRX  ) : Drugs Industry. Market cap of $742.92M. The stock is currently trading at 2% above its 20-Day SMA, 7.07% above its 50-Day SMA, and 26.17%. Net institutional shares purchased over the current quarter at 7.8M, which is 11.55% of the company's 67.56M share float. The stock is a short squeeze candidate, with a short float at 8.53% (equivalent to 5.99 days of average volume). The stock has gained 130.88% over the last year.

3. Endologix (Nasdaq: ELGX  ) : Medical Instruments & Supplies Industry. Market cap of $563.70M. The stock is currently trading at 6.03% above its 20-Day SMA, 4.38% above its 50-Day SMA, and 27.59%. Net institutional shares purchased over the current quarter at 5.7M, which is 11.46% of the company's 49.72M share float. The stock is a short squeeze candidate, with a short float at 7.77% (equivalent to 6.53 days of average volume). The stock has had a couple of great days, gaining 7.1% over the last week.

4. Continucare (NYSE: CNU  ) : Specialized Health Services Industry. Market cap of $383.79M. The stock is currently trading at 2.79% above its 20-Day SMA, 4.45% above its 50-Day SMA, and 23.38%. Net institutional shares purchased over the current quarter at 3.5M, which is 10.78% of the company's 32.48M share float. The stock has gained 94.77% over the last year.

5. Jazz Pharmaceuticals (Nasdaq: JAZZ  ) : Biotechnology Industry. Market cap of $1.77B. The stock is currently trading at 15.44% above its 20-Day SMA, 19.13% above its 50-Day SMA, and 54.26%. Net institutional shares purchased over the current quarter at 2.6M, which is 10.45% of the company's 24.88M share float. This is a risky stock that is significantly more volatile than the overall market (beta = 2.37). The stock has had a couple of great days, gaining 13.88% over the last week.

6. Seattle Genetics (Nasdaq: SGEN  ) : Biotechnology Industry. Market cap of $2.05B. The stock is currently trading at 19.38% above its 20-Day SMA, 1.75% above its 50-Day SMA, and 7.73%. Net institutional shares purchased over the current quarter at 8.5M, which is 7.51% of the company's 113.17M share float. The stock is a short squeeze candidate, with a short float at 21.81% (equivalent to 10.89 days of average volume). The stock has had a couple of great days, gaining 18.07% over the last week.

7. Heartware International (Nasdaq: HTWR  ) : Medical Instruments & Supplies Industry. Market cap of $884.42M. The stock is currently trading at 4.79% above its 20-Day SMA, 4.79% above its 50-Day SMA, and 4.79%. Net institutional shares purchased over the current quarter at 626.3K, which is 6.56% of the company's 9.55M share float. The stock is a short squeeze candidate, with a short float at 14.29% (equivalent to 12.12 days of average volume).

8. Cubist Pharmaceuticals (Nasdaq: CBST  ) : Drug Manufacturers Industry. Market cap of $2.09B. The stock is currently trading at 5.56% above its 20-Day SMA, 0.21% above its 50-Day SMA, and 20.02%. Net institutional shares purchased over the current quarter at 3.4M, which is 5.59% of the company's 60.85M share float. The stock is a short squeeze candidate, with a short float at 14.7% (equivalent to 7.39 days of average volume). The stock has had a couple of great days, gaining 6.07% over the last week.

9. Medicis Pharmaceutical (NYSE: MRX  ) : Biotechnology Industry. Market cap of $2.39B. The stock is currently trading at 9% above its 20-Day SMA, 5.32% above its 50-Day SMA, and 21%. Net institutional shares purchased over the current quarter at 2.7M, which is 4.88% of the company's 55.33M share float. The stock has had a couple of great days, gaining 7.12% over the last week.

10. Watson Pharmaceuticals (NYSE: WPI  ) : Drugs Industry. Market cap of $9.06B. The stock is currently trading at 6.14% above its 20-Day SMA, 1.91% above its 50-Day SMA, and 15.12%. Net institutional shares purchased over the current quarter at 4.9M, which is 3.71% of the company's 132.00M share float. The stock has gained 56.74% over the last year.

List compiled by Daniel Guttridge.

Interactive Chart: Press Play to compare changes in analyst ratings over the last two years for the stocks mentioned above. Analyst ratings sourced from Zacks Investment Research.


Kapitall's Becca Lipman and Daniel Guttridge do not own any of the shares mentioned above. Institutional data sourced from Fidelity, all other from Finviz.

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