Positive week for Cochlear Limited (ASX:COH) institutional investors who lost 17% over the past year

Key Insights

• Significantly high institutional ownership implies Cochlear's stock price is sensitive to their trading actions
• A total of 25 investors have a majority stake in the company with 45% ownership
• Insiders have bought recently

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Every investor in Cochlear Limited (ASX:COH) should be aware of the most powerful shareholder groups. We can see that institutions own the lion's share in the company with 51% ownership. In other words, the group stands to gain the most (or lose the most) from their investment into the company.

After a year of 17% losses, last week’s 3.5% gain would be welcomed by institutional investors as a possible sign that returns might start trending higher.

Let's delve deeper into each type of owner of Cochlear, beginning with the chart below.

See our latest analysis for Cochlear

What Does The Institutional Ownership Tell Us About Cochlear?

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 Cochlear 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. 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 Cochlear's earnings history below. Of course, the future is what really matters.

Institutional investors own over 50% of the company, so together than can probably strongly influence board decisions. Cochlear is not owned by hedge funds. BlackRock, Inc. is currently the company's largest shareholder with 7.2% of shares outstanding. Meanwhile, the second and third largest shareholders, hold 7.2% and 5.7%, of the shares outstanding, respectively.

A deeper look at our ownership data shows that the top 25 shareholders collectively hold less than half of the register, suggesting a large group of small holders where no single shareholder has a majority.

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 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 Cochlear

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.

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 most recent data indicates that insiders own less than 1% of Cochlear Limited. Being so large, we would not expect insiders to own a large proportion of the stock. Collectively, they own AU$70m 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 49% 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.

Next Steps:

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.

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.