MEC Company Ltd.'s (TSE:4971) JP¥8.5b market value fall may be overlooked by institutional investors after a year of 5.9% returns

Key Insights

• Given the large stake in the stock by institutions, MEC's stock price might be vulnerable to their trading decisions
• 50% of the business is held by the top 13 shareholders
• Using data from analyst forecasts alongside ownership research, one can better assess the future performance of a company

Every investor in MEC Company Ltd. (TSE:4971) should be aware of the most powerful shareholder groups. With 45% stake, institutions possess the maximum shares in the company. Put another way, the group faces the maximum upside potential (or downside risk).

Losing money on investments is something no shareholder enjoys, least of all institutional investors who saw their holdings value drop by 11% last week. However, the 5.9% one-year returns may have helped alleviate their overall losses. We would assume however, that they would be on the lookout for weakness in the future.

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

View our latest analysis for MEC

What Does The Institutional Ownership Tell Us About MEC?

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.

MEC already has institutions on the share registry. Indeed, they own a respectable stake in the company. This suggests some credibility amongst professional investors. But we can't rely on that fact alone since institutions make bad investments sometimes, just like everyone does. 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 MEC's historic earnings and revenue below, but keep in mind there's always more to the story.

Hedge funds don't have many shares in MEC. Capital Research and Management Company is currently the company's largest shareholder with 8.6% of shares outstanding. With 6.4% and 5.7% of the shares outstanding respectively, Maeda Holdings Co., Ltd. and Asset Management One Co., Ltd. are the second and third largest shareholders. In addition, we found that Kazuo Maeda, the CEO has 3.9% of the shares allocated to their name.

After doing some more digging, we found that the top 13 have the combined ownership of 50% in the company, suggesting that no single shareholder has significant control over the company.

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. There are plenty of analysts covering the stock, so it might be worth seeing what they are forecasting, too.

Insider Ownership Of MEC

While the precise definition of an insider can be subjective, almost everyone considers board members to be insiders. Company management run the business, but the CEO will answer to the board, even if he or she is a member of it.

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.

Shareholders would probably be interested to learn that insiders own shares in MEC Company Ltd.. In their own names, insiders own JP¥5.1b worth of stock in the JP¥69b company. Some would say this shows alignment of interests between shareholders and the board. But it might be worth checking if those insiders have been selling.

General Public Ownership

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

Private Company Ownership

It seems that Private Companies own 6.4%, of the MEC stock. It's hard to draw any conclusions from this fact alone, so its worth looking into who owns those private companies. Sometimes insiders or other related parties have an interest in shares in a public company through a separate private company.

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. Be aware that MEC is showing 1 warning sign in our investment analysis , you should know about...

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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com