Top Stocks Institutional Investors are buying

By Kirsteen Mackay

Jun 29, 2022

When institutional investors buy shares it sends a buying signal to retail investors. APPN, OXY and SU are three stocks institutions believe in.

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APPN, OXY, SU

Read on to learn more about these three top stocks institutional investors are buying shares in.

The following stocks have been chosen as they have over 50% institutional ownership and have over 100m shares bought. The three stocks we will focus on are:

  • Appian Corporation (NASDAQ: APPN)

  • Occidental Petroleum Corporation (NYSE: OXY)

  • Suncor Energy Inc. (NYSE: SU) (TSX: SU)

The net market value of shares purchased and sold means the total number of shares bought and sold according to FactSet's most recent available data.

  • When this number is positive, there are more buyers than sellers.

  • When this number is negative, there are more sellers than buyers. 

These figures refer to shares traded by both institutional and retail investors. However, as the company's share ownership is more than 50% institutional, we can assume that much of this activity comes from institutional buying and selling.

Appian Corporation (NASDAQ: APPN)

Appian Corp. (NASDAQ: APPN) makes business software tools. Its business process management (BPM) solutions automate and measure business processes. Appian also offers low code application development and platform-as-a-service (PaaS).

According to FactSet data, 74% of APPN shares are held by institutions.

The net market value of APPN shares bought and sold is $107m, with $107.9m purchased.

Why is Appian believed in?

The APPN share price has fallen 66% in the past year, so why are institutional investors buying now? It seems Appian has pricing power because its products offer a cost-saving solution to customers facing inflation.

Should you buy shares in Appian?

The market is in turmoil, so APPN shares may continue in a downward trend, but its unique range of product offerings give the company long-term appeal. Appian also has its sights set on extending its government customer base to a more classified area of the US Dept of Defense.

Who is buying APPN stock?

New York-based investment firm Abdiel Capital Management, which has a 20.4% stake in Appian, has been adding to its holding. Abdiel added $62m worth of APPN stock between May 31 and June 28. 

Where next for Appian?

The APPN price-to-sales ratio (P/S) is at 9.3, which is considerably higher than the industry average of 1.2. This means it could have further to fall if the market continues to drop. Nevertheless, revenue is growing, and APPN stock beat sales and earnings estimates during Q1.

Appian's operating costs have been increasing, leading to an operating loss. The company is not about to go bust, but it may need to raise cash if it wants to make an acquisition.

The company is also facing inflation pressures. 

Berenberg analyst Andrew DeGasperi recently placed a Buy rating on APPN stock with a share price target of $63. The analyst cited Appian's competitive position, upsell opportunity and resilient business model as reasons to invest.

Occidental Petroleum Corporation (NYSE: OXY)

Occidental Petroleum Corp. (NYSE: OXY) is a company that explores for, develops, produces, and markets crude oil and natural gas. The company also manufactures and markets a variety of basic chemicals, vinyls and performance chemicals. It conducts hydrocarbon exploration in the United States and the Middle East and carries out petrochemical manufacturing in the United States, Canada, and Chile. The company was founded in 1920 and is headquartered in Houston, Texas.

According to FactSet data, 82.7% of OXY shares are held by institutions.

The net market value of OXY shares bought and sold is $387.9m.

Why is Occidental Petroleum believed in?

The OXY share price has risen 98.7% in the first six months of 2022, so why are institutional investors buying now? A significant buying signal came after Warren Buffett's Berkshire Hathaway (NYSE: BRK.A) (NYSE: BRK.B) was seen to take a substantial stake in OXY stock. Berkshire now has a 16.3% ownership stake in Occidental Petroleum.

Should you buy shares in Occidental Petroleum?

The Occidental share price is likely to swing in time with the overall oil price, which can be prone to volatility. Nevertheless, Buffett sees something he likes in the future of OXY and is impressed with how the CEO Vicki Hollub is running the company.

Who is buying OXY stock?

While Berkshire Hathaway has the most significant institutional stake, GQG Partners has acquired 2.85% of the company. GQG last disclosed an OXY share purchase in March.

Where next for Occidental Petroleum?

The OXY price-to-earnings ratio (P/E) is at 9.4, which is generally reasonable but above the industry average of 1.1. This means it could drop if the oil price falls significantly. Nevertheless, revenue and free cash flow are increasing.

OXY offers shareholders a 0.8% dividend yield.

The oil industry faces inflation pressures, but natural gas is vital to the green energy transition, and oil still appears to be in demand.

Truist Securities analyst Neal Dingmann recently raised his share price target on OXY stock to $93. He believes Berkshire Hathaway will buy the rest of Occidental Petroleum once it reduces its debt below $20bn. 

Dingmann also said:

While Berkshire Hathaway Energy (Private) is approximately one third coal/gas/wind with most future focus on wind/solar, we believe OXY could fit nicely within the portfolio,

Suncor Energy Inc. (NYSE: SU) (TSX: SU)

Suncor Energy (NYSE: SU) (TSX: SU) is a Canadian integrated energy company based in Calgary, Alberta. It specializes in the production of synthetic crude from oil sands.

According to FactSet data, around 59% of SU shares are held by institutions.

The net market value of SU shares bought and sold is $834m, with $843m being purchased.

Why is Suncor Energy believed in?

The SU share price has risen 42% year-to-date, with a pullback and signs of volatility in June. So, what is attracting institutional investors to SU stock?

RBC Capital Markets recently raised its SU share price target to $53, believing it's at an inflection point. After years of disappointing operational performance, RBC sees encouraging signs with leadership changes and improved safety paramount.

Should you buy shares in Suncor Energy?

The Suncor Energy share price is linked to the volatility of the WTI crude oil price. It is a risky stock, and whether you buy should depend on your long-term outlook for Canadian oil. 

Who is buying SU stock?

Fidelity Investments Canada held a 2.3% stake in Suncor Energy at the end of 2021, but this has since been reduced to 1.9%.

Manulife Investment Management increased its SU stake to 1.4% in March, while activist investor Elliott Investment Management took a 0.7% position.

Where next for Suncor Energy?

The SU price-to-earnings ratio (P/E) is 11, which is above the industry average of 1. This means it could have further to fall if the oil price plummets or sentiment around the oil sands worsens. Operating in the Canadian oil sands is seen as particularly environmentally unfriendly, and with ESG mandates high priority, Suncor Energy remains a risky investment.

Inflation is a concern for all oil operations as labor, machinery, and other input costs rise.

The fact Elliott is a shareholder has encouraged some investors that the company will improve its operations, cut costs and improve shareholder returns long-term.

Suncor offers a 4% dividend yield.

Important Notice And Disclaimer

This article does not provide any financial advice and is not a recommendation to deal in any securities or product. Investments may fall in value and an investor may lose some or all of their investment. Past performance is not an indicator of future performance.