Yahoo Finance In the wake of Alcoa Corporation's (NYSE:AA) latest US$281m market cap drop, institutional owners may be forced to take severe actions
If you want to know who really controls Alcoa Corporation (NYSE:AA), then you'll have to look at the makeup of its share registry. And the group that holds the biggest piece of the pie are institutions with 82% ownership. Put another way, the group faces the maximum upside potential (or downside risk).
And institutional investors endured the highest losses after the company's share price fell by 3.3% last week. The recent loss, which adds to a one-year loss of 3.2% for stockholders, may not sit well with this group of investors. Also referred to as "smart money", institutions have a lot of sway over how a stock's price moves. As a result, if the downtrend continues, institutions may face pressures to sell Alcoa, which might have negative implications on individual investors.
In the chart below, we zoom in on the different ownership groups of Alcoa.
Check out our latest analysis for Alcoa
What Does The Institutional Ownership Tell Us About Alcoa?
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.
Alcoa already has institutions on the share registry. Indeed, they own a respectable stake in the company. This implies the analysts working for those institutions have looked at the stock and they like it. But just like anyone else, they could be wrong. If multiple institutions change their view on a stock at the same time, you could see the share price drop fast. It's therefore worth looking at Alcoa's earnings history below. Of course, the future is what really matters.
Since institutional investors own more than half the issued stock, the board will likely have to pay attention to their preferences. We note that hedge funds don't have a meaningful investment in Alcoa. Looking at our data, we can see that the largest shareholder is BlackRock, Inc. with 13% of shares outstanding. The Vanguard Group, Inc. is the second largest shareholder owning 10% of common stock, and State Street Global Advisors, Inc. holds about 4.1% of the company stock.
Looking at the shareholder registry, we can see that 51% of the ownership is controlled by the top 16 shareholders, meaning that no single shareholder has a majority interest in the ownership.
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 a reasonable number of analysts covering the stock, so it might be useful to find out their aggregate view on the future.
Insider Ownership Of Alcoa
The definition of company insiders can be subjective and does vary between jurisdictions. Our data reflects individual insiders, capturing board members at the very least. 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 Alcoa 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$39m 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
With a 18% ownership, the general public, mostly comprising of individual investors, have some degree of sway over Alcoa. While this size of ownership may not be enough to sway a policy decision in their favour, they can still make a collective impact on company policies.
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.
I like to dive deeper into how a company has performed in the past. You can access this interactive graph of past earnings, revenue and cash flow, for free.
But ultimately it is the future, not the past, that will determine how well the owners of this business will do. Therefore we think it advisable to take a look at this free report showing whether analysts are predicting a brighter future.
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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