After an investor checks a stock's fundamentals and chart, one
other item can set off an alarm.
If you're guessing market direction, a strong industry group
or sector, those are all true. But today let's focus on an
often-overlooked item: institutional support.
You may think you've found the greatest stock in the world,
but if fund managers disagree, your opinion won't matter. Big
money owns the game, and if funds aren't backing a stock, you too
should back off.
This is especially true if the stock doesn't appear to have
support from well-respected fund managers. You want big money
behind the stock, but you want smart big money, not dumb big
Dumb money will often move into a stock as smart money is
leaving. Or as the great military strategist Gen. Douglas
MacArthur once said, failure can often be summed up in two words
-- "too late."
ConsiderScripps Networks Interactive (
) . The company owns the Food Network, Travel Channel and Food
Scripps Networks is the result of a 2007 move that split the
national television networks away from the old media newspapers
and local TV stations which now trade asE.W. Scripps (
E.W. Scripps has a middle-of-the-pack Composite Rating of 54
and a worst-possible Sales + Profit Margins + ROE of E.
Scripps Networks has a 98 Composite Rating and a best-possible
SMR of A.
Earnings for Scripps Networks rose 36% and 20% in the past two
years. The Street expects 14% EPS growth this year.
Last year, operating cash flow per share was an impressive
129% above earnings per share. The dividend payout has increased
60% since the split-off company began paying dividends in August
2008. The current annualized yield is 0.9%.
These numbers aren't bad, but the fund-support picture might
cause disciplined investors to think twice before buying shares.
In the past nine months, more funds have moved into the stock
(651 up from 637) but the overall stake fell 23%. And in the
first half of this year, Fidelity Contrafund reduced its stake
from 2.8 million shares to zero.