We've all heard the old phrase "follow the money", well there's no better example of that than coat-tail investing. By following where the institutional investors are placing their bets, individual investors can ride their coat-tails to hefty profits. Below are a few firms that institutional investors love.
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Gilead Has Room to Run
Gilead Sciences (Nasdaq:GILD) is a California-based biopharma company that specializes in the development and sales of therapeutics in what they say are "areas of unmet medical need". While the idea of what constitutes "unmet" may still be undecided, institutional investors have made their decision and they firmly believe in Gilead. Over 90% of outstanding shares are owned by institutional investors (over 800 million), and if expected growth rates are any indication, individual investors would be wise to follow suit. Having beat earnings expectations by double digits in each of the past four quarters and an expected growth rate of 25%(!) for the coming quarter, Gilead looks like a mature growth stock that still has room to run.
Retail - Good News and Bad
Target (NYSE:TGT), everyone's favorite low-cost retailer has seen its shares rise close to 70% in the past year, leaving rival Wal-Mart (NYSE:WMT) in its dust. It's no wonder that 87% of Target shares are property of institutional investors. Everyone's got February 23 circled on their calendars, as that's when Target will announce earnings from its most recent quarter (estimated to be in the neighborhood of $1.15).
Staying in the retail sector, CVS Caremark (NYSE:CVS) is another institutional favorite with institutional ownership of 83%. As opposed to Target, news surrounding CVS hasn't been the greatest. The end of 2009 saw CVS under investigation for allegedly tapping into personal customer medical records for marketing purposes as well as knowingly selling supposedly expired products to customers in Connecticut. While the "big boys" are holding CVS, others might be smart to conduct their due diligence before jumping into this stock.
Lastly, we have Union Pacific (NYSE:UNP) whose shares are 85% owned by institutional investors. The railroad company has gained more onlookers following Berkshire Hathaway's (NYSE:BRK.A, BRK.B) purchase of Burlington Northern (NYSE:BNI) in early November. Since then Union Pacific is up 14% with many placing bets alongside Warren Buffett that as the economy picks up steam the rail industry will be a major beneficiary. While it remains to be seen whether or not Buffett's buy will prove successful, it's hard to bet against the Oracle.
Looking at the stocks listed above, we can see that they come from a wide variety of industries and include some up and comers along with some old dependable earners. That being said, keeping an eye on what the institutional buyers are investing their cash in can prove a very profitable for everyday investors. (For more, read The Pros And Cons Of Institutional Ownership.)
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