Institutional investors make millions for their clients. The stocks they pick can help you fatten your portfolio too

If you feel perplexed or overwhelmed by the stock markets, you’re not alone. The average investor typically does not have the expertise, the knowledge or the time to make infallible investment decisions 100% of the time. Most people recognize this, and as a result, invest in mutual funds, allowing the professionals to make the right decisions for them.

Of course the management of their in­vestment comes at a cost in the form of front-end, back-end and ongoing management fees. Most of these charges may be hidden in the performance of the fund so the investor doesn’t even realize the true cost. Sometimes these fees can range from 1% to 10%, and considering that the stock market may only gain 10% or so in any given year, these fees can be quite significant.

How then can an investor without a formal investment education or full-time market research make a decent return in the market while avoiding expensive investment advice? One way is simply to follow what the professionals are investing in. To ensure their transparency, financial institutions report their fund performance to the public on a quarterly basis. From this information, investors can track what stocks these pros invested in.

It makes sense to purchase the stocks that these experts have bought and are currently holding in their multi-million dollar client portfolios. There should be no need to second guess the financial institutions which have full-time educated investment analysts that spend countless hours researching the stock markets to identify good investments for their clients.

Granted every analyst may not always be correct but their financial tools, training, and experience, should be more successful than the average investor.

Below are a number of public companies in which not just one, but a number of funds are invested. One would expect that these experts should know how best to invest their clients’ money.

Gentry Resources Ltd. (GNY: TSX $4.99) is a Calgary based O+G company involved in the acquisition, exploration, develop­ment and production of crude oil and natural gas in Western Canada. Gentry is currently trading at its 52-week high of $4.99, up significantly from its low of $1.85. There are approximately 30 mutual funds that own over 10% of Gentry. Forty nine per cent of these funds have held Gentry for the past year and are still holding, 27% have taken profits and sold their Gentry stocks, and 24% recently bought Gentry. With a large number of funds recently buying Gentry shares and nearly half still holding them, there may still be significant growth.

Real Resources Inc. (RER: TSX $14.95) is Calgary-based company active in the exploration, development and production of crude oil and natural gas in western Canada. Real Resources is trading below its 52-week high of $15.38 but significantly higher than its low of $6.10. There are approximately 31 mutual funds that own about 11% of Real. More than 70% of these funds have held Real stock over the year and are still holding, 3% have sold shares and 24% have recently bought Real stock. With very few of the funds selling, a significant portion holding, and some new buying, it seems that there may still be a real growth opportunity for Real investors.

Pulse Data Inc. (PSD: TSX $2.04) is a Calgary-based company specializing in acquir­ing, market­ing and licensing seismic data in the resources industry. Pulse is currently trading near its 52-week high of $2.10, up from a $1.41 low. There are eight mutual funds that own around 6% of Pulse. Forty six per cent of these funds have held Pulse stock over the year and are still holding, 46% have sold Pulse shares and 8% have recently bought shares. With the funds split in half – holding versus taking profits – the institutions may not quite have a pulse on future growth.

Christopher Gulka, CA, CFA is an avid investor, sometime day trader and painstaking researcher. As a financial writer, Gulka has proven his knack for identifying undervalued firms. He also publishes The StockManager, an investment newsletter.

Prairie Trader is an independent overview and assessment of Alberta-based companies in the public markets that have great investment potential. The author declares that he has no investment or business interest in any of the recommended companies described herein. Alberta Venture assumes no responsibility for the accuracy of any stock recommendations. You can reach Gulka at prairietrader@albertaventure.com or send letters about this column to feedback@albertaventure.com.