Painful week for retail investors invested in Daido Steel Co., Ltd. (TSE:5471) after 3.7% drop, institutions also suffered losses

Key Insights

• Significant control over Daido Steel by retail investors implies that the general public has more power to influence management and governance-related decisions
• 50% of the business is held by the top 17 shareholders
• Institutions own 42% of Daido Steel

Every investor in Daido Steel Co., Ltd. (TSE:5471) should be aware of the most powerful shareholder groups. And the group that holds the biggest piece of the pie are retail investors with 42% ownership. Put another way, the group faces the maximum upside potential (or downside risk).

While institutions, who own 42% shares weren’t spared from last week’s JP¥8.7b market cap drop, retail investors as a group suffered the maximum losses

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

See our latest analysis for Daido Steel

What Does The Institutional Ownership Tell Us About Daido Steel?

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.

Daido Steel already has institutions on the share registry. Indeed, they own a respectable stake in the company. 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. 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 Daido Steel's historic earnings and revenue below, but keep in mind there's always more to the story.

We note that hedge funds don't have a meaningful investment in Daido Steel. Nippon Steel Corporation is currently the largest shareholder, with 5.3% of shares outstanding. Meanwhile, the second and third largest shareholders, hold 5.0% and 4.7%, of the shares outstanding, respectively.

A closer look at our ownership figures suggests that the top 17 shareholders have a combined ownership of 50% implying that no single shareholder has a majority.

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 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 Daido Steel

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.

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.

Our most recent data indicates that insiders own less than 1% of Daido Steel Co., Ltd.. But they may have an indirect interest through a corporate structure that we haven't picked up on. It is a pretty big company, so it would be possible for board members to own a meaningful interest in the company, without owning much of a proportional interest. In this case, they own around JP¥224m 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

With a 42% ownership, the general public, mostly comprising of individual investors, have some degree of sway over Daido Steel. 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.

Public Company Ownership

We can see that public companies hold 14% of the Daido Steel shares on issue. We can't be certain but it is quite possible this is a strategic stake. The businesses may be similar, or work together.

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. For instance, we've identified 1 warning sign for Daido Steel that you should be aware of.

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.