Institutional owners may consider drastic measures as Nidec Corporation's (TSE:6594) recent JP¥779b drop adds to long-term losses

Key Insights

• Given the large stake in the stock by institutions, Nidec's stock price might be vulnerable to their trading decisions
• The top 16 shareholders own 50% of the company
• Insider ownership in Nidec is 12%

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Every investor in Nidec Corporation (TSE:6594) should be aware of the most powerful shareholder groups. The group holding the most number of shares in the company, around 46% to be precise, is institutions. Put another way, the group faces the maximum upside potential (or downside risk).

And so it follows that institutional investors was the group most impacted after the company's market cap fell to JP¥2.9t last week after a 21% drop in the share price. The recent loss, which adds to a one-year loss of 10% for stockholders, may not sit well with this group of investors. Also referred to as "smart money", institutions have a lot of sway over how a stock's price moves. As a result, if the decline continues, institutional investors may be pressured to sell Nidec which might hurt individual investors.

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

Check out our latest analysis for Nidec

What Does The Institutional Ownership Tell Us About Nidec?

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

We note that hedge funds don't have a meaningful investment in Nidec. Our data suggests that Shigenobu Nagamori, who is also the company's Top Key Executive, holds the most number of shares at 12%. When an insider holds a sizeable amount of a company's stock, investors consider it as a positive sign because it suggests that insiders are willing to have their wealth tied up in the future of the company. BlackRock, Inc. is the second largest shareholder owning 5.3% of common stock, and The Bank of Kyoto, Ltd., Asset Management Arm holds about 4.3% of the company stock.

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 studying institutional ownership for a company can add value to your research, it is also a good practice to research analyst recommendations to get a deeper understand of a stock's expected performance. Quite a few analysts cover the stock, so you could look into forecast growth quite easily.

Insider Ownership Of Nidec

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.

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.

It seems insiders own a significant proportion of Nidec Corporation. Insiders own JP¥358b worth of shares in the JP¥2.9t company. That's quite meaningful. Most would say this shows a good degree of alignment with shareholders, especially in a company of this size. You can click here to see if those insiders have been buying or selling.

General Public Ownership

The general public, who are usually individual investors, hold a 42% stake in Nidec. 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:

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. Case in point: We've spotted 1 warning sign for Nidec you should be aware of.

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.

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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.