3 stocks institutional investors can’t get enough of

Like private investors, institutional investors are not always right. But they are often the largest owners of individual stocks – and therefore largely responsible for day-to-day market movements.

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Learning who owns the most shares in a particular company can help investors understand what dictates changes in stock prices. When large institutions like hedge funds, mutual funds and ETFs are in control, their actions usually set the day. In other cases, business insiders who own a majority of the stock can manipulate trading activity.

Institutional investors are usually the largest shareholders of a particular stock simply because they have the deepest pockets. They manage thousands of active and passive funds that together accumulate massive assets under management (AUM).

But when institutions hold interests in an unusually high proportion of a company’s outstanding shares, it can be a signal that the so-called “smart money” knows something the little guy doesn’t.

The exceptionally high institutional interest in these three names should spark investor interest.

Is Gentherm Shares Oversold?

Investment and fund managers collectively own 99% of Gentherm Incorporated (NASDAQ: THRM) stock. This information can be derived from 13F forms that these investors are required to file with the SEC on a quarterly basis.

The maker of climate-controlled seats and other vehicle heating and cooling products has the particular attention of two companies. Blackrock and Vanguard, who together manage more than $17 trillion in assets, own approximately 27% of Gentherm’s outstanding shares. The iShares Core S&P Small Cap ETF itself has raked in 7% of the shares, while a few popular Vanguard index funds collectively own 5%.

Of the active investment managers, JP Morgan’s Undiscovered Managers Behavioral Value Fund is Gentherm’s largest stakeholder. This unique mutual fund focuses on small-cap value stocks where the market tends to “overreact to old negative information and underreact to new positive information”. As part of this strategy, significant insider purchases or repurchases are viewed as reactions to overreaction to fundamentally sound companies.

Gentherm fits the model of an undervalued small cap in oversold territory. After climbing to a record high of $99 at the start of the year, a disproportionate sell-off related to supply chain problems and broad market weakness has seen the stock trade around $70. With new growth opportunities in the medical sector and a P/E ratio below the industry average, you should look to Gentherm to warm up again.

Why do investment managers like integrity holdings?

Integer Holdings Corporation (NYSE: ITGR) is a medical device company specializing in wearable cardiovascular and neuromodulation products. All but 0.8% of outstanding shares are held by institutional investors.

Again, Blackrock’s iShares and Vanguard are the largest shareholders with nearly 30% joint ownership. Integer Holdings is also a favorite of several actively managed small-cap value funds. The Fuller & Thaler Behavioral Small Cap Equity Fund (rated 5-star by Morningstar), which also uses a behavior-based approach to stock selection, has it as one of its concern positions. The Delaware Small Cap Value and Franklin Small Cap Value funds also refer to Integer as one of their own funds.

It’s easy to see why the stock is popular among active managers. Integer has beaten the highest and lowest estimates in each of the last five quarters. Demand for products has been strong recently after the pandemic postponed elective surgeries. The company now has a large order book and is expanding its production capacity to continue to meet demand. With a forward P/E of 17x, institutions invest heavily in Integer for a reason.

Is Bath & Body Works stock undervalued?

Bath & Body Works, Inc. (NYSE: BBWI) has 97% institutional ownership. Investors who took a gamble on the retailer of personal care and beauty products at the bottom of the pandemic have really cleaned up.

Inventory has increased more than tenfold from March 2020 to November 2021 due to an insane demand for all things hygiene. Now, however, 45% down from its record peak, Bath & Body Works seems to be circling the drain, but it may not.

Institutional shareholders have taken a bath during the current 4-month loss streak, but are not yet ready to throw in the towel. As the company faces mounting pressure from rising online competitors, a spin-off of the Victoria Secrets business has put Bath & Body Works in a more flexible financial position to pursue growth in brick-and-mortar stores alongside its own e-commerce channels. .

As the owner of 10% shares, Lone Pine Capital is still a big believer in this retail turnaround. The Connecticut-based investment advisor has a 7% weighting in its concentrated equity strategy; only Amazon, Shopify and Mastercard as larger positions.

As a result of the recent shift, Bath & Body Works is trading at less than 10x future earnings. This one smells like an undervalued buying opportunity.


This post 3 stocks institutional investors can’t get enough of was original published at “https://www.entrepreneur.com/article/424148”

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