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2440482.JPG (8303 bytes)Institutional Following

Updated 05/13/99

There are two types of stock investments that require markedly different strategies:

  1. Investments in companies that are heavily traded by institutions like mutual funds.
  2. Investments in companies that are undiscovered by institutions . . . shadow stocks.

Institutional Trading Chart

wpe12.gif (8564 bytes)Pfizer is a large company with plenty of bright prospects. As of early 1998, it's a darling of Wall Street institutional investors who are trading billions of dollars/month in PFE alone.

The 5-minute chart shows heavy trading. The volume lines are near solid without spacing between trades.

Spikes occur at the beginning and/or end of the trading day.

You can  display a line's 5-minute chart by double-clicking on its symbol in the ColorBar. 

wpe14.gif (9108 bytes)The Recommendations screen from the internet show 29 brokers with opinions on Pfizer. This is a heavily followed issue.

wpe15.gif (7001 bytes)Shadow Stock Trading Chart

This is a picture of a shadow stock in the same "hot" industry sector as Pfizer. In sharp contrast, RPC's volume bars are well-separated. The stock goes hours at a time without trading.

Every so often, a broker consolidates a bunch of small orders and makes a "big" trade, but with little impact on price or trend.

Fundamentals are good, with a strong earnings surprise last quarter. The only question is when will it be discovered. 
wpe16.gif (7439 bytes)One broker follows this stock. He thinks a lot of it, although his estimate of last quarter's earnings was way off.

This stock is drifting without sufficient trader interest to generate momentum. 
Strategies Differ

Everything we talk about for FastTrack technical selection and timing applies to Pfizer. In contrast, there isn't enough trading in RPC to sustain a trend. You could get burned trying to unload as little as a thousand shares. The ONLY way to profit from RPC is to Buy and Hold with crossed fingers. This is a fundamental strategy. There are NO appropriate technical trading strategies for RPC.

While it is true that RPC may represent more "value" than Pfizer, that doesn't mean that the price will move higher. Institutions cannot  hold enough of RPC to make an impact on the fund share price regardless of good fundamentals. BUT, if volume picks up and an uptrend becomes established, then individual traders may profit from increase institutional interest.