Painful week for individual investors invested in Nitto Kogyo Corporation (TSE:6651) after 6.1% drop, institutions also suffered losses

Key Insights

• Nitto Kogyo's significant individual investors ownership suggests that the key decisions are influenced by shareholders from the larger public
• 50% of the business is held by the top 16 shareholders
• 23% of Nitto Kogyo is held by Institutions

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If you want to know who really controls Nitto Kogyo Corporation (TSE:6651), then you'll have to look at the makeup of its share registry. With 46% stake, individual investors possess the maximum shares in the company. Put another way, the group faces the maximum upside potential (or downside risk).

While the holdings of individual investors took a hit after last week’s 6.1% price drop, institutions with their 23% holdings also suffered.

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

View our latest analysis for Nitto Kogyo

What Does The Institutional Ownership Tell Us About Nitto Kogyo?

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.

We can see that Nitto Kogyo 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. 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 Nitto Kogyo, (below). Of course, keep in mind that there are other factors to consider, too.

We note that hedge funds don't have a meaningful investment in Nitto Kogyo. Looking at our data, we can see that the largest shareholder is Meito Kousan Co., Ltd. with 18% of shares outstanding. For context, the second largest shareholder holds about 6.2% of the shares outstanding, followed by an ownership of 4.2% by the third-largest shareholder.

A closer look at our ownership figures suggests that the top 16 shareholders have a combined ownership of 50% implying that no single shareholder has a majority.

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. While there is some analyst coverage, the company is probably not widely covered. So it could gain more attention, down the track.

Insider Ownership Of Nitto Kogyo

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.

Most consider insider ownership a positive because it can indicate the board is well aligned with other shareholders. However, on some occasions too much power is concentrated within this group.

Our most recent data indicates that insiders own less than 1% of Nitto Kogyo Corporation. But they may have an indirect interest through a corporate structure that we haven't picked up on. It seems the board members have no more than JP¥195m worth of shares in the JP¥118b company. Many tend to prefer to see a board with bigger shareholdings. A good next step might be to take a look at this free summary of insider buying and selling.

General Public Ownership

The general public-- including retail investors -- own 46% stake in the company, and hence can't easily be ignored. While this size of ownership may not be enough to sway a policy decision in their favour, they can still make a collective impact on company policies.

Private Company Ownership

It seems that Private Companies own 22%, of the Nitto Kogyo stock. It might be worth looking deeper into this. If related parties, such as insiders, have an interest in one of these private companies, that should be disclosed in the annual report. Private companies may also have a strategic interest in the company.

Next Steps:

While it is well worth considering the different groups that own a company, there are other factors that are even more important. Take risks for example - Nitto Kogyo has 1 warning sign we think you should be aware of.

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.