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.

IN PICTURES: World's Greatest Investors

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.

Railroad Bets
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.

Bottom Line
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.)

Use the Investopedia Stock Simulator to trade the stocks mentioned in this stock analysis, risk free!

Related Articles
  1. Mutual Funds & ETFs

    ETF Analysis: iShares MSCI USA Minimum Volatility

    Learn about the iShares MSCI USA Minimum Volatility exchange-traded fund, which invests in low-volatility equities traded on the U.S. stock market.
  2. Stock Analysis

    Should You Follow Millionaires into This Sector?

    Millionaire investors—and those who follow them—should take another look at the current economic situation before making any more investment decisions.
  3. Professionals

    What to do During a Market Correction

    The market has corrected...now what? Here's what you should consider rather than panicking.
  4. Mutual Funds & ETFs

    ETF Analysis: Vanguard Mid-Cap Value

    Take an in-depth look at the Vanguard Mid-Cap Value ETF, one of the largest and most popular mid-cap funds in the U.S. equity space.
  5. Mutual Funds & ETFs

    ETF Analysis: Schwab US Broad Market

    Take an in-depth look at the Schwab U.S. Broad Market ETF, an incredibly low-cost fund based on a wide selection of the U.S. equity market.
  6. Professionals

    Tips for Helping Clients Though Market Corrections

    When the stock market sees a steep drop, clients are bound to get anxious. Here are some tips for talking them off the ledge.
  7. Stock Analysis

    The Safest Stocks You Can Invest in Right Now

    These stocks are likely to hold up better than others in a bear market, but there's a twist.
  8. Investing Basics

    5 Reasons to Expect Lower Stock Returns

    Lower stock returns are likely here to stay for some time. Here are five reasons why.
  9. Investing Basics

    What to Cut From Your Portfolio Right Now

    Owning stocks may shortly become too scary for your portfolio. Here's why, and here are some alternatives.
  10. Personal Finance

    Careers: Equity Research Vs. Investment Banking

    Equity research is sometimes viewed as the unglamorous, lower-paid cousin to investment banking. In this article, we compare the two careers.
RELATED TERMS
  1. Hard-To-Sell Asset

    An asset that is extremely difficult to dispose of either due ...
  2. Sucker Yield

    When an investor has essentially risked all of his capital for ...
  3. PT (Perseroan Terbatas)

    An acronym for Perseroan Terbatas, which is Limited Liability ...
  4. Ltd. (Limited)

    An abbreviation of "limited," Ltd. is a suffix that ...
  5. BHD (Berhad)

    The suffix Bhd. is an abbreviation of a Malay word "berhad," ...
  6. Impact investing

RELATED FAQS
  1. What is the difference between called-up share capital and paid-up share capital?

    The difference between called-up share capital and paid-up share capital is investors have already paid in full for paid-up ... Read Full Answer >>
  2. Why would a corporation issue convertible bonds?

    A convertible bond represents a hybrid security that has bond and equity features; this type of bond allows the conversion ... Read Full Answer >>
  3. How does additional paid in capital affect retained earnings?

    Both additional paid-in capital and retained earnings are entries under the shareholders' equity section of a company's balance ... Read Full Answer >>
  4. What types of capital are not considered share capital?

    The money a business uses to fund operations or growth is called capital, and there are a number of capital sources available. ... Read Full Answer >>
  5. What is the difference between issued share capital and subscribed share capital?

    The difference between subscribed share capital and issued share capital is the former relates to the amount of stock for ... Read Full Answer >>
  6. What happens to the shares of stock purchased in a tender offer?

    The shares of stock purchased in a tender offer become the property of the purchaser. From that point forward, the purchaser, ... Read Full Answer >>

You May Also Like

COMPANIES IN THIS ARTICLE
Trading Center
×

You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!