Institutional investors may adopt severe steps after Toyo Gosei Co.,Ltd.'s (TSE:4970) latest 12% drop adds to a year losses

Key Insights

• Given the large stake in the stock by institutions, Toyo GoseiLtd's stock price might be vulnerable to their trading decisions
• A total of 8 investors have a majority stake in the company with 51% ownership
• Insiders own 26% of Toyo GoseiLtd

Every investor in Toyo Gosei Co.,Ltd. (TSE:4970) should be aware of the most powerful shareholder groups. We can see that institutions own the lion's share in the company with 37% ownership. In other words, the group stands to gain the most (or lose the most) from their investment into the company.

And so it follows that institutional investors was the group most impacted after the company's market cap fell to JP¥63b last week after a 12% drop in the share price. Needless to say, the recent loss which further adds to the one-year loss to shareholders of 1.2% might not go down well especially with this category of shareholders. 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 Toyo GoseiLtd which might hurt individual investors.

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

Check out our latest analysis for Toyo GoseiLtd

What Does The Institutional Ownership Tell Us About Toyo GoseiLtd?

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.

Toyo GoseiLtd already has institutions on the share registry. Indeed, they own a respectable stake in the company. 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 Toyo GoseiLtd, (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 Toyo GoseiLtd. Looking at our data, we can see that the largest shareholder is the CEO Yujin Kimura with 16% of shares outstanding. For context, the second largest shareholder holds about 7.3% of the shares outstanding, followed by an ownership of 6.0% by the third-largest shareholder.

On further inspection, we found that more than half the company's shares are owned by the top 8 shareholders, suggesting that the interests of the larger shareholders are balanced out to an extent by the smaller ones.

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 Toyo GoseiLtd

The definition of an insider can differ slightly between different countries, but members of the board of directors always count. Company management run the business, but the CEO will answer to the board, even if he or she is a member of it.

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 Toyo Gosei Co.,Ltd.. Insiders own JP¥17b worth of shares in the JP¥63b company. We would say this shows alignment with shareholders, but it is worth noting that the company is still quite small; some insiders may have founded the business. You can click here to see if those insiders have been buying or selling.

General Public Ownership

With a 37% ownership, the general public, mostly comprising of individual investors, have some degree of sway over Toyo GoseiLtd. 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.

Next Steps:

While it is well worth considering the different groups that own a company, there are other factors that are even more important. Be aware that Toyo GoseiLtd is showing 1 warning sign in our investment analysis , you should know about...

Ultimately the future is most important. You can access this free report on analyst forecasts for the company.

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.