Furukawa Electric Co., Ltd.'s (TSE:5801) large institutional owners must be happy as stock continues to impress, up 5.9% over the past week

Key Insights

• Institutions' substantial holdings in Furukawa Electric implies that they have significant influence over the company's share price
• A total of 20 investors have a majority stake in the company with 50% ownership
• Ownership research along with analyst forecasts data help provide a good understanding of opportunities in a stock

We've discovered 3 warning signs about Furukawa Electric. View them for free.

A look at the shareholders of Furukawa Electric Co., Ltd. (TSE:5801) can tell us which group is most powerful. The group holding the most number of shares in the company, around 52% to be precise, is institutions. Put another way, the group faces the maximum upside potential (or downside risk).

Last week’s 5.9% gain means that institutional investors were on the positive end of the spectrum even as the company has shown strong longer-term trends. The one-year return on investment is currently 38% and last week's gain would have been more than welcomed.

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

See our latest analysis for Furukawa Electric

What Does The Institutional Ownership Tell Us About Furukawa Electric?

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 Furukawa Electric 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. 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 Furukawa Electric's historic earnings and revenue below, but keep in mind there's always more to the story.

Investors should note that institutions actually own more than half the company, so they can collectively wield significant power. We note that hedge funds don't have a meaningful investment in Furukawa Electric. The company's largest shareholder is Nomura Asset Management Co., Ltd., with ownership of 8.5%. The second and third largest shareholders are Eastspring Investments (Singapore) Limited and Sumitomo Mitsui Trust Asset Management Co., Ltd., with an equal amount of shares to their name at 3.9%.

A closer look at our ownership figures suggests that the top 20 shareholders have a combined ownership of 50% implying that 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 plenty of analysts covering the stock, so it might be worth seeing what they are forecasting, too.

Insider Ownership Of Furukawa Electric

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.

Our data suggests that insiders own under 1% of Furukawa Electric Co., Ltd. in their own names. It is a pretty big company, so it would be possible for board members to own a meaningful interest in the company, without owning much of a proportional interest. In this case, they own around JP¥396m worth of shares (at current prices). It is good to see board members owning shares, but it might be worth checking if those insiders have been buying.

General Public Ownership

With a 46% ownership, the general public, mostly comprising of individual investors, have some degree of sway over Furukawa Electric. 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 Furukawa Electric better, we need to consider many other factors. Consider for instance, the ever-present spectre of investment risk. We've identified 3 warning signs with Furukawa Electric (at least 2 which are significant) , and understanding them should be part of your investment process.

If you would prefer discover what analysts are predicting in terms of future growth, do not miss this free report on analyst forecasts.

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.