Institutional owners may take dramatic actions as Sanken Electric Co., Ltd.'s (TSE:6707) recent 7.6% drop adds to one-year losses

Key Insights

• Significantly high institutional ownership implies Sanken Electric's stock price is sensitive to their trading actions
• A total of 6 investors have a majority stake in the company with 51% ownership
• Analyst forecasts along with ownership data serve to give a strong idea about prospects for a business

A look at the shareholders of Sanken Electric Co., Ltd. (TSE:6707) can tell us which group is most powerful. We can see that institutions own the lion's share in the company with 41% ownership. That is, the group stands to benefit the most if the stock rises (or lose the most if there is a downturn).

And institutional investors saw their holdings value drop by 7.6% last week. Needless to say, the recent loss which further adds to the one-year loss to shareholders of 24% might not go down well especially with this category of shareholders. Often called “market movers", institutions wield significant power in influencing the price dynamics of any stock. As a result, if the downtrend continues, institutions may face pressures to sell Sanken Electric, which might have negative implications on individual investors.

In the chart below, we zoom in on the different ownership groups of Sanken Electric.

See our latest analysis for Sanken Electric

What Does The Institutional Ownership Tell Us About Sanken Electric?

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.

As you can see, institutional investors have a fair amount of stake in Sanken Electric. 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 Sanken Electric's historic earnings and revenue below, but keep in mind there's always more to the story.

It would appear that 30% of Sanken Electric shares are controlled by hedge funds. That worth noting, since hedge funds are often quite active investors, who may try to influence management. Many want to see value creation (and a higher share price) in the short term or medium term. Our data shows that Effissimo Capital Management Pte Ltd. is the largest shareholder with 30% of shares outstanding. In comparison, the second and third largest shareholders hold about 5.0% and 4.3% of the stock.

On further inspection, we found that more than half the company's shares are owned by the top 6 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. There are plenty of analysts covering the stock, so it might be worth seeing what they are forecasting, too.

Insider Ownership Of Sanken Electric

While the precise definition of an insider can be subjective, almost everyone considers board members to be insiders. 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.

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 data suggests that insiders own under 1% of Sanken Electric Co., Ltd. in their own names. It has a market capitalization of just JP¥135b, and the board has only JP¥60m worth of shares in their own names. We generally like to see a board more invested. However it might be worth checking if those insiders have been buying.

General Public Ownership

The general public-- including retail investors -- own 29% stake in the company, and hence can't easily be ignored. While this group can't necessarily call the shots, it can certainly have a real influence on how the company is run.

Next Steps:

It's always worth thinking about the different groups who own shares in a company. But to understand Sanken Electric better, we need to consider many other factors. Like risks, for instance. Every company has them, and we've spotted 3 warning signs for Sanken Electric (of which 2 can't be ignored!) 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.

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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.