Is it important for you to know the percent of a stock that is owned by institutional buyers? First of all, what does institutional ownership mean?
Institutional ownership is the stock owned by large financial players such as hedge funds, pension funds, mutual funds, and private equity firms. These institutions have millions of dollars to invest and can sometimes own millions of shares of each of the stocks they invest in. In other words, they dwarf the 100 to 1000 shares of any stock you might be thinking of buying.
It is important to understand that most of the buying and selling on Wall Street on any given day is done by institutional traders and investors. Yes, there are lots of individual people buying stocks as well, but in terms of sheer numbers most of the buying and selling is done by large organizations. Typically most big company stocks have institutional ownership between about 60% and 85%. That means of all the shares available for a stock, the majority are owned by these very big and influential institutions.
For most stocks you can easily find the percentage owned by these institutional buyers by looking closely at the information provided about the stock. No matter what online broker or free stock quote source you use, this information should be available. In my E*Trade account I can find it under the “insider activity” tab and then going to the “ownership” section”. As and example you can see that Bristol Myers (BMY) is said to have ownership of 64% by institutions:
One thing I noticed is that not every stock site gives the exact same statistics. While E*Trade says 64%, MSN money says that ownership is about 68% for BMY at the time I am writing this. I don’t know which one (if either) is correct but at least they are both in the same ballpark. Sometimes, that is all you can ask for.
As you can imagine, institutions that make these big stock purchases often have dozens of analysts working for them. A LOT of money is at stake and so much research is done from every angle.
Because of this, many individual investors like to buy stocks that have high institutional ownership because they feel that the “experts” at these organization have really done their work. If, after close scrutiny, a stock is good enough for them to buy then it is surely good enough for the individual to buy too.
Because of the thousands or maybe up to millions of shares an institution might own of any stock, they then might try to get out there and get the stock some good publicity. That is often what you see going on when various money managers go on television giving their stock picks. This is also why you have to always be weary of what they recommend and wonder what kind of agenda they have? Are they recommending a stock because they bought it and own it or are their opinions impartial? Some shows and articles have a disclosure statement about whether the “guests” own the stocks they are analyzing but in reality, you never really know what they own.
In summary, when the Dow or Nasdaq moves up or down everyday, it is mostly being moved by these institutional organizations. Yes, regular people like you and me are buying and selling stocks but the numbers of shares we buy is quite small in comparison to the bigger players. They are the ones that are most responsible for making a stock move one direction or another.
By the way, if you want to find stock ownership percentages on MSN Money just type in the symbol of any stock and then look toward the bottom of the green bar on the left of the page. Click on the “ownership” link and it will take you to the page that shows an institutional ownership % and you might want to add in the % of mutual fund ownership as well because those funds also usually have a large amount of research capability as well as access to a lot of other resources an individual investor wouldn’t have.