Institutions offer investment cues

Donald Saltz

April 17, 1992|By Donald Saltz

One of the principal advantages of owning shares of investment firms such as mutual funds, or the similar closed-end investment companies, is to be able to tap into the expertise of their managers who choose the stocks.

It's advantageous if investors know the stocks that a fund holds, whether or not they acquire shares of that fund. A mutual fund or closed-end investment company might own 100 or more stocks, well beyond what the individual investor seeks. The investor might want to consider owning shares of companies that are popular with the fund managers as well as with those who guide investments for other large institutional investors.

The fact that an investment company owns a stock adds credibility to that stock because investment firms are discerning. Here are some area companies that are long-time favorites of mutual funds, closed-end investment companies, pension funds, insurance companies and other institutional investors.

McCormick & Co. now has about 80 million shares, after a recent 2-for-1 split, and nearly half of them are owned by about 175 investment companies. Twice as many investment companies own the shares as did five years ago -- but the total number of shares the companies own has not increased in the past five years, despite sales growth and soaring earnings by the Sparks-based spices and flavorings firm.

Martin Marietta of Bethesda is 65 percent owned by investment companies -- about 350 in all -- a percentage that has risen 20 points in five years. The defense and construction contractor, has 10 percent fewer shares now than it had five years back -- 49.5 million compared with 55 million -- but profits have progressed steadily and have doubled during the period.

Of 62 million Black & Decker shares, 35 million, or 55 percent, are held by investment companies. The percentage is the same as it was five years ago when the share total was similar to the current number. The erratic earnings pattern during the five-year period when B&D made a large acquisition (Emhart Corp.) hasn't helped institutional ownership.

The Marriott Corp., which has about 95 million shares, is slightly more than one-third owned by institutional investors. Times were much better for Marriott five years ago -- earnings gained annually and there were few real estate problems -- but the percentage of institutional ownership was only a percentage point better than today.

Five years ago, Maryland National Bank was 37 percent owned by funds and other institutions -- they held 10.3 million of 27.7 million shares, but things are very different today. The state's largest bank is now part of MNC Financial, whose existence was threatened by poor real estate loans. The tough times caused institutions to desert MNC, which now has about 17 percent institutional ownership. The number of investment companies that own the stock has fallen from 163 to 82.

USF&G of Baltimore, a large insurance and financial services firm, was 61 percent owned by institutions five years ago, compared with 28 percent now. The total number is down by one-third to 225. USF&G was also hit hard by problems with its real estate and bond investments.

Institutions are not quick to dump poor-performing shares of large corporations, on the theory that they will recover. However, stocks that continue to lag severely will experience a decline in their institutional ownership.

Baltimore Sun Articles
Please note the green-lined linked article text has been applied commercially without any involvement from our newsroom editors, reporters or any other editorial staff.