Basic Materials can be a challenging sector for stock-pickers, but one that is well worth the effort for those self-directed investors who are not afraid of a little bit of risk.
Materials companies operate against the backdrop of global economic conditions, to say nothing of commodities futures trading, and their operations are often uniquely dependent upon favorable environmental conditions, and the lone investor must adjust her or his understanding of fundamental analysis if the desired returns are to be obtained.
Though not by any means fool-proof, the amount of a company that is owned by financial institutions can be a good indicator of its underlying strength. Institutions have incredible research tools and other information streams that allow them to consider all of the variables as part of a complete picture.
One piece of fundamental data that investors can use in making their choices is the change in the rate of institutional transactions of a given stock. The figure represents the increase or decrease in institutional ownership of a company over the last three months.
The following six Materials stocks have a market-share of $300,000 or greater, and have posted the largest increases in institutional ownership of their shares over the last three months, meaning that the “smart money” is thinking that now is the right time to buy in:
Gastar Exploration Ltd. (GST)
Industry: Independent Oil & Gas
Market Cap: $371.11 million
Price: $6.47
Institutional Ownership: 36 percent
3-Month Increase in Institutional Ownership: +25.09 percent
2014 Return: -6.50 percent
Plains GP Holdings LP (PAGP)
Industry: Oil & Gas Pipelines
Market Cap: $15.77 billion
Price: $26.03
Institutional Ownership: 9.10 percent
3-Month Increase in Institutional Ownership: +28 percent
2014 Return: -2.76 percent
Midcoast Energy Partners LP (MEP)
Industry: Independent Oil & Gas
Market Cap: $920.23 million
Price: $20.35
Institutional Ownership: 27.10 percent
3-Month Increase in Institutional Ownership: 99.90 percent
2014 Return: +3.85 percent
Western Refining Logistics LP (WNRL)
Industry: Oil & Gas Pipelines
Market-Cap: $1.23 billion
Price: $26.90
Institutional Ownership: 10.10 percent
3-Month Increase in Institutional Ownership: +100.60 percent
2014 Return: +4 percent
OCI Partners LP (OCIP)
Industry: Major Diversified Chemicals
Market Cap: $2.15 billion
Price: $26.71
Institutional Ownership: 0.20 percent
3-Month Increase in Institutional Ownership: +302.50 percent
2014 Return: -3.22 percent
Crestwood Midstream Partners LP (CMLP)
Industry: Oil & Gas Pipelines
Market Cap: $2.27 billion
Price: $23.43
Institutional Ownership: 52.40 percent
3-Month Increase in Institutional Ownership: +312.15 percent
2014 Return: -5.90 percent
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