Yahoo Finance ResMed Inc.'s (NYSE:RMD) recent 3.5% pullback adds to one-year year losses, institutional owners may take drastic measures
A look at the shareholders of ResMed Inc. (NYSE:RMD) can tell us which group is most powerful. We can see that institutions own the lion's share in the company with 74% ownership. In other words, the group stands to gain the most (or lose the most) from their investment into the company.
And institutional investors saw their holdings value drop by 3.5% last week. The recent loss, which adds to a one-year loss of 16% for stockholders, may not sit well with this group of investors. Institutions or "liquidity providers" control large sums of money and therefore, these types of investors usually have a lot of influence over stock price movements. As a result, if the downtrend continues, institutions may face pressures to sell ResMed, which might have negative implications on individual investors.
Let's delve deeper into each type of owner of ResMed, beginning with the chart below.
See our latest analysis for ResMed
What Does The Institutional Ownership Tell Us About ResMed?
Many institutions measure their performance against an index that approximates the local market. So they usually pay more attention to companies that are included in major indices.
We can see that ResMed does have institutional investors; and they hold a good portion of the company's stock. 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 ResMed's historic earnings and revenue below, but keep in mind there's always more to the story.
Institutional investors own over 50% of the company, so together than can probably strongly influence board decisions. We note that hedge funds don't have a meaningful investment in ResMed. The company's largest shareholder is The Vanguard Group, Inc., with ownership of 12%. Meanwhile, the second and third largest shareholders, hold 9.2% and 5.0%, of the shares outstanding, respectively.
A closer look at our ownership figures suggests that the top 16 shareholders have a combined ownership of 50% implying that no single shareholder has a majority.
Researching institutional ownership is a good way to gauge and filter a stock's expected performance. The same can be achieved by studying analyst sentiments. Quite a few analysts cover the stock, so you could look into forecast growth quite easily.
Insider Ownership Of ResMed
While the precise definition of an insider can be subjective, almost everyone considers board members to be insiders. Management ultimately answers to the board. However, it is not uncommon for managers to be executive board members, especially if they are a founder or the CEO.
I generally consider insider ownership to be a good thing. However, on some occasions it makes it more difficult for other shareholders to hold the board accountable for decisions.
Our data suggests that insiders own under 1% of ResMed Inc. in their own names. It is a very large company, so it would be surprising to see insiders own a large proportion of the company. Though their holding amounts to less than 1%, we can see that board members collectively own US$301m worth of shares (at current prices). In this sort of situation, it can be more interesting to see if those insiders have been buying or selling.
General Public Ownership
With a 25% ownership, the general public, mostly comprising of individual investors, have some degree of sway over ResMed. While this group can't necessarily call the shots, it can certainly have a real influence on how the company is run.
Next Steps:
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. Case in point: We've spotted 1 warning sign for ResMed you should be aware of.
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.
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