It's important to remember that buying stocks is just like any other purchase -- many investors buy when a stock rises and sell when a stock falls, but a rising price means a more expensive stock, and a falling price often means a bargain.
For a look at potential bargains, we ran a screen on stocks trading under $5 for those that the "big money investors" believe in.
Short-sellers and hedge funds
Institutional investors like hedge fund managers and mutual fund managers have a lot of experience in choosing investments, and they have access to the most sophisticated research. If they're buying a stock, it's a signal to take a second look.
As for short-sellers, they are also considered very knowledgeable due to the stringent requirements and background checks they are held to (this is because short-selling involves large amounts of borrowing).
We ran a screen on stocks trading under $5 for those seeing bullish sentiment from both short-sellers and institutions: decreases in shares shorted m/m as well as significant net institutional purchases over the current quarter.
Do you think these stocks are bargains waiting to rally? Use this list as a starting point for your own analysis.
List sorted by net institutional purchases as a percent of share float. (Click here to access free, interactive tools to analyze these ideas.)
2. Sify Technologies Limited
3. Central European Distribution
4. Standard Pacific
5. Giant Interactive Group
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 Alexander Crawford does not own any of the shares mentioned above. Institutional data sourced from Fidelity, short data sourced from Yahoo! Finance.
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