This paper develops a model of stock prices that incorporates both differences of opinion among investors and short-sales constraints. The key insight is that the breadth of ownership, defined as the fraction of investors with long positions in a stock, serves as a valuation indicator. When breadth is low, indicating tight short-sales constraints, stock prices are expected to be high relative to fundamentals, leading to lower expected returns. Conversely, when breadth is high, prices are expected to be lower. Using quarterly data on mutual fund holdings from 1979 to 1998, the authors find that stocks with decreasing breadth underperform those with increasing breadth by 6.38% in the first twelve months after portfolio formation, even after controlling for size, book-to-market, and momentum. This evidence supports the hypothesis that changes in breadth can forecast stock returns.This paper develops a model of stock prices that incorporates both differences of opinion among investors and short-sales constraints. The key insight is that the breadth of ownership, defined as the fraction of investors with long positions in a stock, serves as a valuation indicator. When breadth is low, indicating tight short-sales constraints, stock prices are expected to be high relative to fundamentals, leading to lower expected returns. Conversely, when breadth is high, prices are expected to be lower. Using quarterly data on mutual fund holdings from 1979 to 1998, the authors find that stocks with decreasing breadth underperform those with increasing breadth by 6.38% in the first twelve months after portfolio formation, even after controlling for size, book-to-market, and momentum. This evidence supports the hypothesis that changes in breadth can forecast stock returns.