Institutional investors control 78% of Diversified Energy Company PLC (LON:DEC) and were rewarded last week after stock increased 9.2%

Key Insights

• Significantly high institutional ownership implies Diversified Energy's stock price is sensitive to their trading actions
• 51% of the business is held by the top 13 shareholders
• Recent purchases by insiders

Every investor in Diversified Energy Company PLC (LON:DEC) should be aware of the most powerful shareholder groups. We can see that institutions own the lion's share in the company with 78% ownership. That is, the group stands to benefit the most if the stock rises (or lose the most if there is a downturn).

And last week, institutional investors ended up benefitting the most after the company hit UK£681m in market cap. The gains from last week would have further boosted the one-year return to shareholders which currently stand at 14%.

In the chart below, we zoom in on the different ownership groups of Diversified Energy.

Check out our latest analysis for Diversified Energy

What Does The Institutional Ownership Tell Us About Diversified Energy?

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 have a fair amount of stake in Diversified Energy. 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. When multiple institutions own a stock, there's always a risk that they are in a 'crowded trade'. When such a trade goes wrong, multiple parties may compete to sell stock fast. This risk is higher in a company without a history of growth. You can see Diversified Energy's historic earnings and revenue below, but keep in mind there's always more to the story.

Institutional investors own over 50% of the company, so together than can probably strongly influence board decisions. Hedge funds don't have many shares in Diversified Energy. Looking at our data, we can see that the largest shareholder is BlackRock, Inc. with 5.5% of shares outstanding. With 5.4% and 4.7% of the shares outstanding respectively, Jupiter Fund Management Plc and Columbia Management Investment Advisers, LLC are the second and third largest shareholders. Furthermore, CEO Robert Hutson is the owner of 2.4% of the company's shares.

A closer look at our ownership figures suggests that the top 13 shareholders have a combined ownership of 51% implying that no single shareholder 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. Quite a few analysts cover the stock, so you could look into forecast growth quite easily.

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 report that insiders do own shares in Diversified Energy Company PLC. In their own names, insiders own UK£23m worth of stock in the UK£681m company. It is good to see some investment by insiders, but it might be worth checking if those insiders have been buying.

General Public Ownership

The general public-- including retail investors -- own 10% stake in the company, and hence can't 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.

Private Company Ownership

It seems that Private Companies own 7.7%, of the Diversified Energy stock. It's hard to draw any conclusions from this fact alone, so its worth looking into who owns those private companies. Sometimes insiders or other related parties have an interest in shares in a public company through a separate private company.

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. Consider for instance, the ever-present spectre of investment risk. We've identified 4 warning signs with Diversified Energy (at least 1 which is potentially serious) , and understanding them should be part of your investment process.

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.