With 61% ownership in Nintendo Co., Ltd. (TSE:7974), institutional investors have a lot riding on the business

Key Insights

• Significantly high institutional ownership implies Nintendo's stock price is sensitive to their trading actions
• 50% of the business is held by the top 21 shareholders
• Analyst forecasts along with ownership data serve to give a strong idea about prospects for a business

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A look at the shareholders of Nintendo Co., Ltd. (TSE:7974) can tell us which group is most powerful. The group holding the most number of shares in the company, around 61% to be precise, is institutions. In other words, the group stands to gain the most (or lose the most) from their investment into the company.

Last week’s 4.7% gain means that institutional investors were on the positive end of the spectrum even as the company has shown strong longer-term trends. The one-year return on investment is currently 39% and last week's gain would have been more than welcomed.

Let's take a closer look to see what the different types of shareholders can tell us about Nintendo.

Check out our latest analysis for Nintendo

What Does The Institutional Ownership Tell Us About Nintendo?

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.

Nintendo 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. 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 Nintendo's historic earnings and revenue below, but keep in mind there's always more to the story.

Institutional investors own over 50% of the company, so together than can probably strongly influence board decisions. Hedge funds don't have many shares in Nintendo. The company's largest shareholder is BlackRock, Inc., with ownership of 7.0%. Meanwhile, the second and third largest shareholders, hold 4.7% and 4.6%, of the shares outstanding, respectively.

After doing some more digging, we found that the top 21 have the combined ownership of 50% in the company, suggesting that no single shareholder has significant control over the company.

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

Insider Ownership Of Nintendo

While the precise definition of an insider can be subjective, almost everyone considers board members to be insiders. The company management answer to the board and the latter should represent the interests of shareholders. Notably, sometimes top-level managers are on the board themselves.

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 Nintendo Co., Ltd.. Being so large, we would not expect insiders to own a large proportion of the stock. Collectively, they own JP¥252m of stock. In this sort of situation, it can be more interesting to see if those insiders have been buying or selling.

General Public Ownership

With a 39% ownership, the general public, mostly comprising of individual investors, have some degree of sway over Nintendo. 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:

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. Consider risks, for instance. Every company has them, and we've spotted 1 warning sign for Nintendo you should know about.

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.