10: The Essential Rules for Beating the Market

Chapter 7. Watch the Institutional Ownership

"Contrary to what you hear on TV every day, there are no undiscovered stocks, so quit looking for them!"

Equation 7.1. 

In Rules 1 and 2, you learned how find the best stocks to buy. You learned how to pick the best time to buy or short in Rule 3. In Rule 4, you learned when to sell. In Rule 5, you mastered how to avoid emotional entanglements with stocks. Rule 6 showed you how to use insider buying, not insider selling, to help you refine your list of stocks under buying consideration.

Rule 7 is another stock selection refinement rule. Here, you will learn how to use institutional ownership as another important element for finding just the right stock to buy at the right time.

Think with me here for a moment. What if I told you that all the big name institutional investors were going to put the combined resources of all their corporate research staffs together to find the very best companies with the best management teams, the best products, the best growth plans, the best products in the pipeline, the most undervalued, and the highest likelihood that the stock price for these companies was the most likely to move significantly higher? And when they complete this monumental task of analysis, and after they have narrowed their list down to just the few that they really want to own, they are going to call you up and tell you which companies ...