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You may think that as an individual investor you don’t need to care about what the institutional investors are doing.

But you’d be wrong.

After all, the “I” in CAN SLIM stands for institutional investors.

These money managers are the ones that move the needle, accounting for the majority of major price movements.

One of the key secrets to successful investing is to buy a stock before its potential is realized by the masses.

In fact, once everyone figures it out, it is probably a good time to sell.

Many investors base their decisions on how much a company pays dividends.

Don’t do this.

Most outstanding growth stocks deliberately don’t pay dividends so they can reinvest profits into the company.

On the flip side, don’t avoid a company just because it does pay dividends. Instead, don’t worry about dividends. Base your investment decision on the CAN SLIM models instead.

Big institutions that primarily invest in stocks that are in the S&P 500 will never do much better or worse than the index.

A small or mid-cap growth-stock manager, if he or she is very good, should be able to beat it over several years.

This advice is for institutional investors hiring new money managers for the firms they represent.

When selecting a new money manager, consider their latest 5-year performance as well as a more recent period. Diversification among the types, manager styles and locations should also be considered.

Any portfolio manager must be given a complete cycle to prove their performance. This means a full bull and a full bear market.

This will probably be at least a few years.

Then, at the end of this period, replace the bottom 20% of underperforming managers.

Contrary to what some may say, it is possible to beat the indexes.

Possible, but not easy.

Managers who can actually beat the market indexes on a consistent basis are a minority.

Read the next chapter here.

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