Diversified Energy Company PLC's (LON:DEC) recent 8.2% pullback adds to one-year year losses, institutional owners may take drastic measures

Key Insights

• Institutions' substantial holdings in Diversified Energy implies that they have significant influence over the company's share price
• A total of 16 investors have a majority stake in the company with 50% ownership
• Insiders have bought recently

Every investor in Diversified Energy Company PLC (LON:DEC) should be aware of the most powerful shareholder groups. And the group that holds the biggest piece of the pie are institutions with 79% ownership. That is, the group stands to benefit the most if the stock rises (or lose the most if there is a downturn).

As a result, institutional investors endured the highest losses last week after market cap fell by UK£44m. Needless to say, the recent loss which further adds to the one-year loss to shareholders of 28% might not go down well especially with this category of shareholders. Often called “market movers", institutions wield significant power in influencing the price dynamics of any stock. As a result, if the decline continues, institutional investors may be pressured to sell Diversified Energy which might hurt individual investors.

Let's take a closer look to see what the different types of shareholders can tell us about Diversified Energy.

See our latest analysis for Diversified Energy

What Does The Institutional Ownership Tell Us About Diversified Energy?

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.

Diversified Energy already has institutions on the share registry. Indeed, they own a respectable stake in the company. 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. It is not uncommon to see a big share price drop if two large institutional investors try to sell out of a stock at the same time. So it is worth checking the past earnings trajectory of Diversified Energy, (below). Of course, keep in mind that there are other factors to consider, too.

Institutional investors own over 50% of the company, so together than can probably strongly influence board decisions. Diversified Energy is not owned by hedge funds. Columbia Management Investment Advisers, LLC is currently the company's largest shareholder with 5.1% of shares outstanding. In comparison, the second and third largest shareholders hold about 5.0% and 4.9% of the stock. Additionally, the company's CEO Robert Hutson directly holds 2.6% of the total shares outstanding.

Looking at the shareholder registry, we can see that 50% of the ownership is controlled by the top 16 shareholders, meaning that no single shareholder has a majority interest in the ownership.

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 Diversified Energy

The definition of an insider can differ slightly between different countries, but members of the board of directors always count. 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.

We can see that insiders own shares in Diversified Energy Company PLC. As individuals, the insiders collectively own UK£18m worth of the UK£489m company. Some would say this shows alignment of interests between shareholders and the board. But it might be worth checking if those insiders have been selling.

General Public Ownership

The general public-- including retail investors -- own 17% 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:

It's always worth thinking about the different groups who own shares in a company. But to understand Diversified Energy better, we need to consider many other factors. Case in point: We've spotted 4 warning signs for Diversified Energy you should be aware of, and 2 of them shouldn't be ignored.

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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com