Given the large stake in the stock by institutions, Duke Energy's stock price might be vulnerable to their trading decisions
A total of 25 investors have a majority stake in the company with 43% ownership
If you want to know who really controls Duke Energy Corporation (NYSE:DUK), then you'll have to look at the makeup of its share registry. The group holding the most number of shares in the company, around 65% to be precise, is institutions. Put another way, the group faces the maximum upside potential (or downside risk).
Institutional investors would probably welcome last week's 3.5% increase in share prices after a year of 7.3% losses as a sign that returns are likely to begin trending higher.
In the chart below, we zoom in on the different ownership groups of Duke Energy.
What Does The Institutional Ownership Tell Us About Duke Energy?
Institutions typically measure themselves against a benchmark when reporting to their own investors, so they often become more enthusiastic about a stock once it's included in a major index. We would expect most companies to have some institutions on the register, especially if they are growing.
Duke Energy already has institutions on the share registry. Indeed, they own a respectable stake in the company. This can indicate that the company has a certain degree of credibility in the investment community. However, it is best to be wary of relying on the supposed validation that comes with institutional investors. They too, get it wrong sometimes. When multiple institutions own a stock, there's always a risk that they are in a 'crowded trade'. When such a trade goes wrong, multiple parties may compete to sell stock fast. This risk is higher in a company without a history of growth. You can see Duke Energy's historic earnings and revenue below, but keep in mind there's always more to the story.
Since institutional investors own more than half the issued stock, the board will likely have to pay attention to their preferences. Duke Energy is not owned by hedge funds. Looking at our data, we can see that the largest shareholder is The Vanguard Group, Inc. with 9.1% of shares outstanding. Meanwhile, the second and third largest shareholders, hold 7.4% and 5.5%, of the shares outstanding, respectively.
On studying our ownership data, we found that 25 of the top shareholders collectively own less than 50% of the share register, implying that no single individual has a majority interest.
While studying institutional ownership for a company can add value to your research, it is also a good practice to research analyst recommendations to get a deeper understand of a stock's expected performance. There are plenty of analysts covering the stock, so it might be worth seeing what they are forecasting, too.
Insider Ownership Of Duke Energy
While the precise definition of an insider can be subjective, almost everyone considers board members to be insiders. Company management run the business, but the CEO will answer to the board, even if he or she is a member of it.
Insider ownership is positive when it signals leadership are thinking like the true owners of the company. However, high insider ownership can also give immense power to a small group within the company. This can be negative in some circumstances.
Our data suggests that insiders own under 1% of Duke Energy Corporation in their own names. Being so large, we would not expect insiders to own a large proportion of the stock. Collectively, they own US$90m of stock. It is good to see board members owning shares, but it might be worth checking if those insiders have been buying.
General Public Ownership
The general public-- including retail investors -- own 35% stake in the company, and hence can't easily be ignored. This size of ownership, while considerable, may not be enough to change company policy if the decision is not in sync with other large shareholders.
I find it very interesting to look at who exactly owns a company. But to truly gain insight, we need to consider other information, too. Take risks for example - Duke Energy has 2 warning signs (and 1 which shouldn't be ignored) we think you should know about.
Ultimately the future is most important. You can access this free report on analyst forecasts for the company.
NB: Figures in this article are calculated using data from the last twelve months, which refer to the 12-month period ending on the last date of the month the financial statement is dated. This may not be consistent with full year annual report figures.
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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.