Institutional ownership of a company's shares is, in itself, not sufficient reason to purchase a stock. But a high level of institutional ownership can be a tip-off that a company's prospects are strong. Below, we highlight a couple of stocks with high institutional ownership and solid fundamentals – and another couple with great fundamentals and absolutely no institutional interest whatsoever.

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Arthur J. Gallagher and Co.
(NYSE:AJG) provides risk management and insurance brokerage services to customers throughout the English-speaking world.

The company has recently been on the acquisition warpath, acquiring no less than four companies in separate transactions over the last month. Included among them are Nourse Insurance Brokers, Sellers Group LLC, Creative Benefit Solutions LLC, and the Walker Taylor Agency.

Wild Acquisition Spree
The company's stock has remained in a holding pattern over that period, as investors and analysts attempt to digest what the buying spree means for the company's future. That said, the company has still managed a nearly 50% increase since hitting 52-week lows in March.

The stock yields around 6% and trades at a reasonable price-to-sales ratio of 1.27. Three-quarters of Arthur Gallagher's shares are held by institutions.

Avon Products, Inc. (NYSE:AVP), a manufacturer and direct-sell marketer of beauty and fashion products, is another company with a very high level of institutional ownership. 87% of the company's outstanding float is owned by professionals. And Avon's fundamentals are also strong. Avon offers an above average annual dividend of 3.27% and trades with a trailing P/E of about 13.5. The shares are up roughly 20% in the last two months.

American Depositary Receipts and Investment Pros
Institutions have steered clear of ADR purchases for a number of reasons, foremost among them, they have preferred to buy directly from the company's home market where trading volumes are higher and liquidity is not an issue. A number of compliance issues have also barred institutions from participating actively in the local ADR market. (Learn more about ADRs in our ADR Basics Tutorial)

Two ADRs that therefore have almost no "institutional ownership" are actually two of the largest corporations on the planet. They're both pharmaceutical producers with strong fundamentals, and both have made the news recently in connection with the swine flu outbreak.

Sanofi-Aventis SA (NYSE:SNY) has a market cap of $87 billion, a dividend yield of 4.5% and trades with a P/E ratio of just under 15. The company is one of the top producers of H1N1 flu virus vaccines. Sanofi-Aventis stock is up over 15% in just the last two months.

Roche Holding Ltd. (OTC:RHHBY) sells a treatment for the virus called Tamiflu. It's not a vaccine, but has produced positive clinical results for the flu's symptoms. Roche yields an annual 3.20% dividend and sports a trailing P/E multiple of slightly over 14. The company has a massive market cap of over $227 billion.

The Wrap
The above described stocks show that institutional investment numbers are not always indicative of a stock's profit potential. What really counts in the end, are the fundamentals.(Learn about the pros how big players can create and destroy value for shareholders in our article, The Pros And Cons Of Institutional Ownership)

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