The big shareholder groups in Applied Materials, Inc. (NASDAQ:AMAT) have power over the company. Generally speaking, as a company grows, institutions will increase their ownership. Conversely, insiders often decrease their ownership over time. We also tend to see lower insider ownership in companies that were previously publicly owned.
Applied Materials is a pretty big company. It has a market capitalization of US$56b. Normally institutions would own a significant portion of a company this size. Taking a look at our data on the ownership groups (below), it’s seems that institutions are noticeable on the share registry. Let’s take a closer look to see what the different types of shareholder can tell us about Applied Materials.
What Does The Institutional Ownership Tell Us About Applied Materials?
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.
As you can see, institutional investors own 84% of Applied Materials. 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.
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 Applied Materials. The Vanguard Group, Inc. is currently the company’s largest shareholder with 7.9% of shares outstanding, Next, we have BlackRock, Inc. and Capital Research and Management Company as the second and third largest shareholders, holding 7.3% and 7.1%, of the shares outstanding, respectively.
Additionally, we found that the top 18 have the combined ownership of 51% in the company, suggesting that no one share holder has significant control over the company.
While it makes sense to study institutional ownership data for a company, It also makes sense to study analyst sentiments to know which way the wind is blowing. There are plenty of analysts covering the stock, so it might be worth seeing what they are forecasting, too.
Insider Ownership Of Applied Materials
While the precise definition of an insider can be subjective, almost everyone considers board members to be insiders. The company management answer to the board; and the latter should represent the interests of shareholders. Notably, sometimes top-level managers are on the board, themselves.
Most consider insider ownership a positive because it can indicate the board is well aligned with other shareholders. However, on some occasions too much power is concentrated within this group.
Our information suggests that Applied Materials, Inc. insiders own under 1% of the company. It is a very large company, so it would be surprising to see insiders own a large proportion of the company. Though their holding amount to less than 1%, we can see that board members collectively own US$218m worth of shares (at current prices). There’s no doubt that we learn useful information from looking at a company’s ownership structure and shareholders. But ultimately, many risks exist within the business itself, rather than its shareholders. For example, we’ve discovered 1 warning sign for Applied Materials which any shareholder or potential investor should be aware of.
General Public Ownership
With a 15% ownership, the general public have some degree of sway over AMAT. While this group can’t necessarily call the shots, it can certainly have a real influence on how the company is run.
While it is well worth considering the different groups that own a company, there are other factors that are even more important.
I like to dive deeper into how a company has performed in the past. You can find historic revenue and earnings in this detailed graph.
If you are like me, you may want to think about whether this company will grow or shrink. Luckily, you can check this free report showing analyst forecasts for its 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.
If you spot an error that warrants correction, please contact the editor at email@example.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.
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