Shin-Etsu Chemical Co., Ltd.'s (TSE:4063) large institutional owners must be happy as stock continues to impress, up 4.7% over the past week

Key Insights

• Given the large stake in the stock by institutions, Shin-Etsu Chemical's stock price might be vulnerable to their trading decisions
• 50% of the business is held by the top 17 shareholders
• Using data from analyst forecasts alongside ownership research, one can better assess the future performance of a company

If you want to know who really controls Shin-Etsu Chemical Co., Ltd. (TSE:4063), then you'll have to look at the makeup of its share registry. And the group that holds the biggest piece of the pie are institutions with 61% ownership. In other words, the group stands to gain the most (or lose the most) from their investment into the company.

And things are looking up for institutional investors after the company gained JP¥582b in market cap last week. The one-year return on investment is currently 45% and last week's gain would have been more than welcomed.

In the chart below, we zoom in on the different ownership groups of Shin-Etsu Chemical.

View our latest analysis for Shin-Etsu Chemical

What Does The Institutional Ownership Tell Us About Shin-Etsu Chemical?

Many institutions measure their performance against an index that approximates the local market. So they usually pay more attention to companies that are included in major indices.

We can see that Shin-Etsu Chemical does have institutional investors; and they hold a good portion of the company's stock. This implies the analysts working for those institutions have looked at the stock and they like it. But just like anyone else, they could be wrong. 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 Shin-Etsu Chemical, (below). Of course, keep in mind that there are other factors to consider, too.

Since institutional investors own more than half the issued stock, the board will likely have to pay attention to their preferences. Shin-Etsu Chemical is not owned by hedge funds. BlackRock, Inc. is currently the largest shareholder, with 6.1% of shares outstanding. For context, the second largest shareholder holds about 6.1% of the shares outstanding, followed by an ownership of 4.3% by the third-largest shareholder.

Looking at the shareholder registry, we can see that 50% of the ownership is controlled by the top 17 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 Shin-Etsu Chemical

The definition of company insiders can be subjective and does vary between jurisdictions. Our data reflects individual insiders, capturing board members at the very least. 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.

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.

Our most recent data indicates that insiders own less than 1% of Shin-Etsu Chemical Co., Ltd.. It is a very large company, so it would be surprising to see insiders own a large proportion of the company. Though their holding amounts to less than 1%, we can see that board members collectively own JP¥3.0b 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

The general public, who are usually individual investors, hold a 37% stake in Shin-Etsu Chemical. 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:

While it is well worth considering the different groups that own a company, there are other factors that are even more important.

I like to dive deeper into how a company has performed in the past. You can access this interactive graph of past earnings, revenue and cash flow, for free.

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.