The degree to which reputable institutional investors (mutual funds, pension funds, hedge funds) own and are increasing positions in a stock — a measure of sophisticated demand.
Deeper Explanation
O'Neil observed that individual investors cannot meaningfully move stock prices — institutions control 70-80% of daily market volume. For a stock to sustain a major upward move, institutions must be buying. Increasing institutional ownership — particularly among high-quality funds with strong performance records — is the fuel behind sustained price advances. O'Neil prefers stocks with a handful of excellent institutions buying, not 500 mediocre ones: widespread ownership means potential sellers outnumber potential buyers. The ideal pattern: a few outstanding funds accumulating a position while the stock forms a base, before the breakout makes the story obvious to all.
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