Institutional Ownership Driving Momentum?

Another investment idea that piggy backs off of Bespoke Investment Group’s great research. Bespoke broke down the S&P 500 into groups of 50 based on levels of institutional ownership, and looked at the performance of those groups since the November 20th market low. What they discovered was that those stocks with the highest amount of institutional ownership were the best performers. Specifically, the most widely owned group of 50 stocks was up +35% since 11/20, while the second group was 30.7%. Bespoke asks a very good question – “Is this an indication that the deleveraging from institutions has finally started to ease?”


Bespoke's decile performance and institutional ownership 

We wanted to take this idea a step further and look at strategies run on Validea.com that include institutional ownership. One of the models that takes this criteria into consideration is Validea’s momentum strategy, which could be one of the more rigorous approaches we’ve implemented. It’s made up of 13 unique criteria, including annual earnings growth, earning consistency, relative strength trend over the past four months, strong price performance vs. other stocks, low long-term debt, and strong institutional ownership. Below are five stocks that are currently included in the strategy’s model portfolio.

  • WORLD FUEL SERVICES CORPORATION – INT
  • APOLLO GROUP, INC. – APOL
  • COGENT, INC. – COGT
  • PETMED EXPRESS, INC. – PETS
  • INVESTORS BANCORP, INC. – ISBC