It's a stock market fact that institutional buying and selling - moves by pension funds, mutual funds, endowments and like - account for the vast majority of the movement in equity prices. Collectively, individual investors represent a fraction of the buying power that institutional investors command. Each quarter, investment funds with over $100 million dollars in assets must report their quarterly holdings to the SEC. From these filings, Value Line - one of my favorite investment research tools - publishes a list of top institutional purchases during the quarter.

IN PICTURES: 9 Simple Investing Ratios You Need To Know

Surprising Name at the Top
Combing through hundreds of filings, the folks at Value Line identify names with the highest increase in shares held. To be sure, institutional investors are always buying and selling stock so purchases made in the third quarter are probably not as accurate today. Nevertheless it is an interesting list because it can yield additional clues about what type of stocks or industries the big money is looking.

It may come as surprise to many that Citigroup (NYSE:C) was an institutional favorite with nearly a 5% increase in shares held during the quarter. At $4.63 shares in Citigroup have moved up nicely in the past several weeks but still trade at a 20% discount to book. The company has spent the past several years shedding assets and improving the balance sheet. This institutional push could be a sign that Citi is on a stable path to recovery. (For more, see Deep Discount To Book Value Stocks.)

The biggest institutional buy was Zimmer Holdings (NYSE:ZMH), a manufacturer of medical implants and other related surgical products. Institutions increased their shares held in Zimmer by nearly 17% in the third quarter. Shares look fairly priced at 12 times forward earnings and the company has a clean balance sheet.

Different Strokes for Different Folks
Institutional investors were buying across various industries in the quarter. Another huge purchase was casino operator Wynn Resorts (Nasdaq:WYNN) with a 14% increase in shares held. As debt markets improved in 2010, the highly levered casino stocks went on a tear. Wynn shares today trade for $105 and 45 times forward earnings. It's unclear what the institutions are seeing in this case.

Insurance businesses were a favorite of institutions in third quarter. MetLife (NYSE:MET) and Aon Corp (NYSE:AON) were both on the top of the list of major institutional purchases. Both companies trade at decent multiples. Yet MetLife trades at 80% of book while Aon trades at over 200% of book value, respectively.

A Great Stock Screen
Looking at a list of top institutional buys is a great stock screen - not a buy list. And the inherent lag time between the publication of such a list and the actual purchasing is an even more compelling reason that names on the list should be analyzed carefully before making any decisions. (For related reading, check out Institutional Investors And Fundamentals: What's The Link?)

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

Related Articles
  1. Stock Analysis

    Fortinet: A Great Play on Cybersecurity

    Discover how a healthy product mix, large-business deal growth and the boom of the cybersecurity industry are all driving Fortinet profits.
  2. Stock Analysis

    2 Catalysts Driving Intrexon to All-Time Highs

    Examine some of the main reasons for Intrexon stock tripling in price between 2014 and 2015, and consider the company's future prospects.
  3. Stock Analysis

    Net Neutrality: Pros and Cons

    The fight over net neutrality has become an amazing spectacle. But at its core, it's yet another skirmish in cable television's war to remain relevant.
  4. Charts & Patterns

    Understand How Square Works before the IPO

    Square is reported to have filed for an IPO. For interested investors wondering how the company makes money, Investopedia takes a look at its business.
  5. Technical Indicators

    4 Ways to Find a Penny Stock Worth Millions

    Thinking of trading in risky penny stocks? Use this checklist to find bargains, not scams.
  6. Professionals

    Chinese Slowdown Affects Iron Ore Market

    The Chinese economy's ongoing slowdown is having a major impact on iron ore demand.
  7. Investing Basics

    Why do Debt to Equity Ratios Vary From Industry to Industry?

    Obtain a better understanding of the debt/equity ratio, and learn why this fundamental financial metric varies significantly between industries.
  8. Personal Finance

    A Day in the Life of an Equity Research Analyst

    What does an equity research analyst do on an everyday basis?
  9. Mutual Funds & ETFs

    ETF Analysis: PowerShares S&P 500 Downside Hedged

    Find out about the PowerShares S&P 500 Downside Hedged ETF, and learn detailed information about characteristics, suitability and recommendations of it.
  10. Mutual Funds & ETFs

    ETF Analysis: iShares Morningstar Small-Cap Value

    Find out about the Shares Morningstar Small-Cap Value ETF, and learn detailed information about this exchange-traded fund that focuses on small-cap equities.
RELATED TERMS
  1. Equity

    The value of an asset less the value of all liabilities on that ...
  2. Profit Margin

    A category of ratios measuring profitability calculated as net ...
  3. Quarter - Q1, Q2, Q3, Q4

    A three-month period on a financial calendar that acts as a basis ...
  4. Debt Ratio

    A financial ratio that measures the extent of a company’s or ...
  5. Price-Earnings Ratio - P/E Ratio

    The Price-to-Earnings Ratio or P/E ratio is a ratio for valuing ...
  6. Net Present Value - NPV

    The difference between the present values of cash inflows and ...
RELATED FAQS
  1. What is the formula for calculating compound annual growth rate (CAGR) in Excel?

    The compound annual growth rate, or CAGR for short, measures the return on an investment over a certain period of time. Below ... 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. When does the fixed charge coverage ratio suggest that a company should stop borrowing ...

    Since the fixed charge coverage ratio indicates the number of times a company is capable of making its fixed charge payments ... Read Full Answer >>
  4. 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 >>
  5. What is the difference between the return on total assets and an interest rate?

    Return on total assets (ROTA) represents one of the profitability metrics. It is calculated by taking a company's earnings ... Read Full Answer >>
  6. 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 >>

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!