I regularly track small- and mid-cap names that show the potentially winning combination of price action and revenue-driven earnings growth. A key factor behind their price performance is institutional ownership.
It's often a helpful exercise to track which top-performing mutual funds hold shares of a stock you're eyeing. Of course, in the case of small-caps and mid-caps, that equation is a little different than it is for larger stocks, blue chips or dividend payers that are widely held in a range of funds with varying objectives.
When I ran my mid-cap screen over the weekend, I wanted to see which stocks were among the holdings of top-performing mid-cap funds.
Athenahealth (ATHN) bolted 13.6% last week in more than double normal turnover after beating earnings estimates and, more importantly, raising its full-year outlook. The medical software maker has grown revenue at rates of 27% or higher over the past eight quarters. Earnings growth slowed to the single digits recently, down from triple-digit gains in late 2010 and early 2011.
As of Friday's close, the stock was up 89% year to date. It fell along with the indices on Monday, but was still holding well above its 5-day exponential moving average.
Athenahealth has a market cap of $3.3 billion and it trades about 520,000 shares a day, on average.
A fund with significant holdings in Athenahealth is the Artisan Midcap Fund (ARTMX), which is up 9.6% so far in 2012. That's better than the S&P 500, but lagging the Nasdaq Composite. It's outpacing the Russell Midcap Growth Index ETF (IWP), which is up 6.92% this year.
Another top holding of the fund is market research firm IHS (IHS). The company has a market cap of $6.9 billion and the stock trades 464,000 shares a day.
IHS rallied to an all-time high of $109.28 on July 5 and then pulled back to fund support above its 50-day moving average. It rebounded off that line on July 11 after the company boosted its full-year revenue guidance. The stock gapped down Monday and was holding below its 50-day moving average. If it gets support near that price line it could become an orderly consolidation that eventually offers a new buy point.
The company has reported double-digit revenue growth in every quarter during the past two years. But earnings performance has been more erratic.
IHS is also a holding of the T. Rowe Price Midcap Growth Fund (RPMGX), a top-rated fund that's up 6.2% year-to-date.
Another stock that the two funds have in common -- at least as of the most recently reported quarter -- is Trimble Navigation (TRMB), which has been selling off hard lately. The maker of GPS and other electronic navigation gear for industrial and agricultural applications has been sinking on concerns about a slowdown in European sales. It's currently trading beneath its 200-day line. Turnover spiked last week as the stock finished 4.3% lower at $42.29, 24% below its April 19 high.
It gapped down to a six-month low on Monday, along with the market selloff.
Trimble has a market cap just south of $5.3 billion and it trades 1.1 million shares a day. For individual investors, Trimble is too much of a risk at this time. Not only is it below its 200-day line, but the stock's 5-day exponential moving average is below its 15-day average. In addition, its 50-day line just crossed below its 200-day.
In other words, the moving average trends argue against going long on the stock at this time. When the 50-day moves back above the longer-term line that could potentially offer a buy signal to investors and traders looking for an early entry point.
