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I am working on a tutorial for the I in CANSLIM for our IBD Meetup. In doing some research on this topic, I came up with some issues that I could not resolve. In how to make money in stocks, in referring to the number of institutional owners, it says "20 might be a reasonable minimum number in a few rare cases involving small or newer companies". The book, The successful Investor says only 10 are needed. I did a Screen, which I shared in Marketsmith for stocks with less than 100 institutional owners and only came up with a few stocks (JVA, SFUN, SIMO & SODA). JVA has the strongest institutional support of this list.
Is the criteria, No of Funds <20, still valid? The average of the top 2500 stocks is 573 Institutions. Also, in Nov 2010, Marketsmith significantly expanded the scope of institutions that are included in the number of funds count. Raising the counts for 4 times their previous values. For example, I looked at the number of funds owning a stock in the Sep-09 Qtr, on a chart printed before the change with one printed after the change. For MELI, MS had reported 78 funds, now it reports 296 institutions for the same Sep-09 qtr. AAPL, had 883 funds, now MS reports 4059 funds. Most other stocks also jumped up, around 4 times their previous values. Should that Minimum of 20, also be raised by 4 times?
The Following is the CAN SLIM analysis for JVA
C=Last Qtr EPS % chg was 47%. Its Analyst coverage is low (2), EPS Est for Cur Yr is 73%, EPS Est are being revised upwards, the highest revision upward of the stocks I track.
A=Annual EPS % Chg is erractic with swings from profits to losses, Last yr was down - typical of a turnaround stock, but recent EPS is good; ROE is good (19); Profit margins are greater than Industry median, but is at 4.6%, which isn't bad for the industry; cash flow needs further examination; Its SMR is good (B).
N=Its IPO was in 2005 and the Industry is going through some NEW conditions. With GMCR the leader in the industry. It hasn't received much coverage in IBD though.
S=Excellant. Avg Daily Vol is 43.6% of float. Short interest is 26% of float. Its Acc/Dis rating is A. All of this makes for a strong supply side demand to move the stock up - which it did.
L=Excellant. The retail sector is ranked #2, it has been in the top 6 for 5 weeks now, It's Industry rank is 2, with a Group RS rating of 99.
I=Excellant. It has 13 institutional owners, Several mutual funds owning it with an A rating. According to Edgar, 11 mutual funds hold the stock, the is up from 7 (57% increase), shares owned is up 42% and this information is delayed by months, not reflecting its recent big move. Combined with its A/D rating of A, its U/D vol is 2.8 and recent volume action, confirms strong institutional support.
As this is part of my I in CANSLIM tutorial. How much weight should the "No of funds" be given? Is it that important?
Or, does this confirm the rule to ignore stocks with less than 20 institutional owners? Should the number be higher given the change to the IBD database back in Nov?
As our Meetup is this evening, I don't have much time, but, as I'm sure you did, I noticed that the recent PowerPoint presentation on Institutional Sponsorship states that a minimum number of funds owning a stock might be 50. As WON stresses, it seems to be more important to see increasing fund ownership over recent quarters than an absolute number. As I've prepped for this Meetup,I have been frustrated by the difficulty in assessing the quality of the fund ownership--the proprietary Sponsorship Rating doesn't prove very helpful. The fund info in the paper also fails to give me much guidance. I'll keep digging and add any info I may come across. Brad
Many weeks have passed, and maybe you've already discovered this but didn't see any further comments. Looking at a stock chart in MS on the right side, click "related info", go to Ownership then at the bottom, Show Fund Ownership. In the list that generates in the list contents window you can sort the funds by "Rank vs all Funds" Hope this helps. Chris
Just to let you know, today’s webinar topic is on Institutional Sponsorship and during the afternoon session, Scott O’Neil is planning on speaking in the webinar.
Here is the link to the live webinar and it can also be used when we archive the presentation.
The MarketSmith Team
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