Could Applied Materials, Inc.’s (NASDAQ:AMAT) Investor Composition Influence The Stock Price?

Every investor in Applied Materials, Inc. (NASDAQ:AMAT) should be aware of the most powerful shareholder groups. Generally speaking, as a company grows, institutions will increase their ownership. Conversely, insiders often decrease their ownership over time. Companies that have been privatized tend to have low insider ownership.

Applied Materials is a pretty big company. It has a market capitalization of US$40b. Normally institutions would own a significant portion of a company this size. In the chart below, we can see that institutional investors have bought into the company. Let’s delve deeper into each type of owner, to discover more about Applied Materials.

Check out our latest analysis for Applied Materials

NasdaqGS:AMAT Ownership Summary April 3rd 2020
NasdaqGS:AMAT Ownership Summary April 3rd 2020

What Does The Institutional Ownership Tell Us About Applied Materials?

Institutional investors commonly compare their own returns to the returns of a commonly followed index. So they generally do consider buying larger companies that are included in the relevant benchmark index.

We can see that Applied Materials does have institutional investors; and they hold 83% of the stock. 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 Applied Materials’s earnings history, below. Of course, the future is what really matters.

NasdaqGS:AMAT Income Statement April 3rd 2020
NasdaqGS:AMAT Income Statement April 3rd 2020

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 Applied Materials. The Vanguard Group, Inc. is currently the company’s largest shareholder with 8.0% of shares outstanding. Next, we have BlackRock, Inc. and Capital Research and Management Company as the second and third largest shareholders, holding 7.5% and 6.1%, of the shares outstanding, respectively.

A closer look at our ownership figures suggests that the top 20 shareholders have a combined ownership of 51% implying that no one share holder 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. 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 Applied Materials

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.

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 most recent data indicates that insiders own less than 1% of Applied Materials, Inc.. Being so large, we would not expect insiders to own a large proportion of the stock. Collectively, they own US$159m of stock. In this sort of situation, it can be more interesting to see if those insiders have been buying or selling.

General Public Ownership

The general public, with a 16% stake in the company, will not easily be ignored. While this group can’t necessarily call the shots, it can certainly have a real influence on how the company is run.

Next Steps:

It’s always worth thinking about the different groups who own shares in a company. But to understand Applied Materials better, we need to consider many other factors. Consider risks, for instance. Every company has them, and we’ve spotted 2 warning signs for Applied Materials 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.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned.

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Thank you for reading.