When mutual funds, banks, insurers and pensions pile into a stock, they drive it higher. Follow their lead and you're likely to prosper. You need these heavy hitters' buying power. That's why it's crucial to know if they're building positions in a stock you own or are thinking about buying. A rating of A or B indicates net buying by institutions.
Institutions have brains as well as brawn.
They have teams of researchers to uncover the best stocks. Almost all great stocks have at least one mutual fund rated A- or better just before they break out. That's why IBD also gauges the quality of sponsorship. Institutional backing props up great stocks when they're correcting and then propels them to new heights. That indicates big institutions are driving up the price.