How to Identify Heavyweight Stocks?

2023-06-16
Summary:

Heavy stocks are usually stocks that investors believe have high growth potential or high returns. The investment strategy of heavy stocks can bring high returns, but there are also high risks.

What does Heavy Stock Mean?

Heavy-position stocks refer to stocks held by large organizations and funds, and of course, there are regulations for this holding. If a stock is heavily held by multiple fund companies or institutions and accounts for more than 20% of the circulating market value, it is called a heavily held stock. This means that if more than 20% of this stock is held by the fund or institution, it is called a heavily held stock.


So, identifying which stocks are heavily held by institutions is the first step in screening stocks. There are several benefits to doing this:

1. Due to the unique nature of A-shares, many stocks have significant fundamental problems and often experience thunderstorms, but ordinary retail investors lack fundamental analysis ability. So it is a time-saving and labor-saving method to only buy stocks with heavy fund holdings and have professional institutions review the fundamentals of individual stocks for us;


2. Institutions are an important force in the main force, and their movements are an important force in determining the hot topics of market segments and individual stock trends, so the probability of bull stocks appearing will increase significantly.

Heavy positions in stocks

How to Identify Heavyweight Stocks

It is easy to identify heavy stocks in the stock market from the trading volume.


Stocks with chips in the main hands have a lower turnover rate. For example, Kweichow Moutai, Hengrui Pharmaceutical, Supor, and other major heavy-position stocks have increased many times, but the stock turnover rate is less than 1% every day! Because the vast majority of chips are in the hands of the main players, the stock price has risen so much without much selling out, resulting in scarce trading volume. This type of stock, which usually has a turnover rate of less than 1%, even if it has a big positive trend, has the most concentrated chips.


It is easy to see from the trend whether the chips are in the hands of the main players.


The trend of stocks with a large number of main chips is not at the same pace as the overall market. It is often manifested as a major market decline, but it does not fall. When the market rises sharply, it does not fall. Because the stock price has been controlled by the main force, its operation has its own rules. The more concentrated the chips are in the main players' hands, the greater the difference between the trend of stocks and the market.


From the annual reports of listed companies, it can be seen where the chips are.


The annual reports of listed companies will publish the top ten circulating shareholders every year. By calculating the shareholding and number of shares held by the top ten shareholders, one can determine where the chips are concentrated. Take the Industrial and Commercial Bank of China as an example: the top ten shareholders actually hold more than 96% of the shares outstanding! This is a typical symbol of chips in the hands of the main force. For example, Supor's top ten circulating shareholders hold more than 66% of the shares, and the per capita stock market value reaches more than 4 million yuan! This is clearly a characteristic of chips being concentrated in the hands of the main players.


But retail investors should not think that buying stocks with concentrated chips in the hands of the main players is an easy way to make money. Even large and concentrated stocks like Maotai cannot be held by most retail investors, and making money in the stock market is not easy.


In short, after investing in heavily held stocks, investors should also pay attention to the risks that may arise in the stock, such as sudden withdrawals of funds and institutions or sudden changes in the fundamentals of the stock, which are all risk factors that can lead to a decline in the stock.

Proven Gold Trading Strategies & Easy Account Setup

Proven Gold Trading Strategies & Easy Account Setup

Learn how to open a gold futures account and discover effective trading strategies to maximize your investments. Get started with simple steps and expert tips.

2024-07-19
Oracle and its stock investment value

Oracle and its stock investment value

Oracle is a leading cloud and data solutions provider with stable stock, strong technology, market influence, and good long-term growth potential.

2024-07-19
Trading Rules and Buying Techniques for QDII Funds

Trading Rules and Buying Techniques for QDII Funds

QDII funds diversify overseas assets and reduce risk. Trades are based on NAV on trading days. Regular, adjusted investments optimize returns.

2024-07-19