Top Buys With High Institutional Holdings

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 |  Includes: DIS, EMC, TROW, TRV, TRW, VMW
by: Codespeed

Along with strong growth prospects, high institutional holdings matter because institutional portfolio managers have ample resources and closeness with company CEOs and Boards—investors can consider such holdings as a form of approval for the stock.

When market sentiments or the stock's technicals turn positive, institutional trading makes a bigger impact because greater levels of accumulations occur, which tends to raise the stock price significantly higher.

Growth

Investors must look for companies with positive growth in both earnings and revenue. Looking at only EPS growth does not show the whole picture because better earnings can be achieved by using methods such as cost cutting. On the other hand, a positive growth in revenue shows that the company's business is growing overall. Looking at both metrics indicates that the company has a growing business, which is increasingly earning more money.

Take a look at the following top buys that meet these criteria.

(1) The Walt Disney Company (NYSE:DIS)

Disney is arguably the world's most popular media and entertainment conglomerate that operates theme parks globally and is also involved in films, television broadcasting and merchandise licensing.

  • Sector: Services - Broadcasting & Cable TV
  • Price*: $49.77
  • 52-week Range: $28.19 - $50.54
  • Analyst Rating: Buy
  • Dividend Yield: 1.2%
  • Long Term Forward EPS Growth (3-5 Years): 12.48%
  • EPS Growth (TTM vs. previous TTM): 22.47%
  • Revenue Growth (TTM vs. previous TTM): 4.99%
  • Institutional Holdings: 65%

(2) EMC Corporation (NYSE:EMC)

EMC is among the world's largest suppliers of enterprise storage systems. The company is one of the best Big Data Technology plays in the entire stock market today, as well as holds a huge 80 percent stake in the server virtualization software company VMware (NYSE:VMW).

  • Sector: Technology - Computer Storage Devices
  • Price*: $26.80
  • 52-week Range: $19.84 - $30.00
  • First Consensus Recommendation: Buy
  • Dividend Yield: None
  • Long Term Forward EPS Growth (3-5 Years): 14.46%
  • EPS Growth (TTM vs. previous TTM): 26.04%
  • Revenue Growth (TTM vs. previous TTM): 12.97%
  • Institutional Holdings: 80%

(3) T. Rowe Price Group, Inc. (NASDAQ:TROW)

This company is one of the best financial holding services company in the United States with a large pool of several outperforming mutual funds.

  • Sector: Financial - Investment Services
  • Price*: $60.81
  • 52-week Range: $44.68 - $66.00
  • First Consensus Recommendation: Buy
  • Dividend Yield: 2.16%
  • Long Term Forward EPS Growth (3-5 Years): 12.97%
  • EPS Growth (TTM vs. previous TTM): 4.93%
  • Revenue Growth (TTM vs. previous TTM): 7.03%
  • Institutional Holdings: 67%

(4) TRW Automotive Holdings Corp. (NYSE:TRW)

TRW Automotive Corp is a leading supplier of automotive systems, modules and components for global vehicle manufacturers with a target price of more than $63.

  • Sector: Consumer Cyclical - Auto & Truck Parts
  • Price*: $40.02
  • 52-week Range: $28.85 - $49.08
  • First Consensus Recommendation: Buy
  • Dividend Yield: None
  • Long Term Forward EPS Growth (3-5 Years): 3.30%
  • EPS Growth (TTM vs. previous TTM): 4.7%
  • Revenue Growth (TTM vs. previous TTM): 5.59%
  • Institutional Holdings: 95%

(5) The Travelers Companies, Inc. (NYSE:TRV)

This company is a leading provider of commercial property liability and homeowners, as well as auto insurance to businesses, government units, associations and individuals.

  • Sector: Financial - Insurance (Prop. & Casualty)
  • Price*: $63.71
  • 52-week Range: $45.97 - $65.27
  • First Consensus Recommendation: Buy
  • Dividend Yield: 2.88%
  • Long Term Forward EPS Growth (3-5 Years): 10.68%
  • EPS Growth (TTM vs. previous TTM): 9.41%
  • Revenue Growth (TTM vs. previous TTM): 0.20%
  • Institutional Holdings: 80%

* Prices as of August 3, 2012.

Conclusion

These are excellent stock plays with good growth prospects, high analyst ratings and institutional approval in the form of holdings. Investors must keep these stocks in their watch-lists and monitor price movements and news closely to enter the right trade at the right time.

As far as August 2012 is concerned, the past week's economic data did have some positive signs, and could possibly ease some market fears in the short term. Overall, the market movement in the next couple of months will be heavily dependent on key economic indicators relating to housing, construction/industrial, consumer spending and employment. Historically, September has not fared well overall and has been the worst performer for most indices. My recommendation to investors is to not initiate new positions "hands over fist" this August, but rather wait for pullbacks in the next couple of months and enter the trade with a long-term (12-24 months) horizon.

Disclosure: I am long EMC.