Institutional Sponsorship

Institutional sponsorship refers to ownership of a stock by institutions. According to the CANSLIM system, it is advisable for an investor to consider whether a stock has a few institutions owning it. The idea behind this principle is that institutions search the market rigorously for investments and if thousands of institutions don’t find a stock attractive, then there may be something wrong with the stock. Of course, it is possible for a stock to have too much institutional sponsorship. If institutions own a substantial percentage of a stock, this may potentially lead to large drops if some bad news comes out and institutions stampede out of the stock.

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