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. Stock Analysis

    Analyzing Altria's Return on Equity (ROE) (MO)

    Learn about Altria Group's return on equity (ROE) and analyze net profit margin, asset turnover and financial leverage to determine what is causing its high ROE.
  2. Investing News

    Icahn's Bet on Cheniere Energy: Should You Follow?

    Investing legend Carl Icahn continues to lose money on Cheniere Energy, but he's increasing his stake. Should you follow his lead?
  3. Stock Analysis

    Analyzing Google's Return on Equity (ROE) (GOOGL)

    Learn about Alphabet's return on equity. How has its ROE changed over time, how does it compare to its peers and what factors are driving ROE for the company?
  4. Investing News

    Is Buffett's Bet on Oil Right for You? (XOM, PSX)

    Oil stocks are getting trounced, but Warren Buffett still likes one of them. Should you follow the leader?
  5. Investing News

    Chipotle Served with Criminal Probe

    Chipotle's beat muted expectations and got a clear bill from the CDC, but it now appears that an investigation into its E.coli breakout has expanded.
  6. Stock Analysis

    Analyzing Sprint Corp's Return on Equity (ROE) (S)

    Learn about Sprint's return on equity. Find out why its ROE is negative and how asset turnover and financial leverage impact ROE relative to Sprint's peers.
  7. Stock Analysis

    Why Alphabet is the Best of the 'FANGs' for 2016

    Alphabet just impressed the street, but is it the best FANG stock?
  8. Investing News

    A 2016 Outlook: What January 2009 Can Teach Us

    January 2009 and January 2016 were similar from an investment standpoint, but from a forward-looking perspective, they were very different.
  9. Mutual Funds & ETFs

    3 Vanguard Equity Fund Underperformers

    Discover three funds from Vanguard Group that consistently underperform their indexes. Learn how consistent most Vanguard low-fee funds are at matching their indexes.
  10. Investing News

    Alphabet Earnings Beat Expectations (GOOGL, AAPL)

    Alphabet's earnings crush analysts' expectations; now bigger than Apple?
RELATED FAQS
  1. How do dividends affect retained earnings?

    When a company issues a cash dividend to its shareholders, the retained earnings listed on the balance sheet are reduced ... Read Full Answer >>
  2. 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 >>
  3. 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 >>
  4. 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 >>
  5. 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 >>
  6. 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 >>
COMPANIES IN THIS ARTICLE
Trading Center