After losing 30% in the past year, Riken Keiki Co., Ltd. (TSE:7734) institutional owners must be relieved by the recent gain

Key Insights

• Given the large stake in the stock by institutions, Riken Keiki's stock price might be vulnerable to their trading decisions
• A total of 11 investors have a majority stake in the company with 52% ownership
• Past performance of a company along with ownership data serve to give a strong idea about prospects for a business

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Every investor in Riken Keiki Co., Ltd. (TSE:7734) should be aware of the most powerful shareholder groups. And the group that holds the biggest piece of the pie are institutions with 56% ownership. In other words, the group stands to gain the most (or lose the most) from their investment into the company.

Institutional investors would probably welcome last week's 7.8% increase in the share price after a year of 30% losses as a sign that returns may to begin trending higher.

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

Check out our latest analysis for Riken Keiki

What Does The Institutional Ownership Tell Us About Riken Keiki?

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.

Riken Keiki 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. 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 Riken Keiki, (below). Of course, keep in mind that there are other factors to consider, too.

Investors should note that institutions actually own more than half the company, so they can collectively wield significant power. Hedge funds don't have many shares in Riken Keiki. Looking at our data, we can see that the largest shareholder is Capital Research and Management Company with 6.9% of shares outstanding. For context, the second largest shareholder holds about 5.9% of the shares outstanding, followed by an ownership of 5.6% by the third-largest shareholder.

A closer look at our ownership figures suggests that the top 11 shareholders have a combined ownership of 52% implying that no single shareholder has a majority.

While studying institutional ownership for a company can add value to your research, it is also a good practice to research analyst recommendations to get a deeper understand of a stock's expected performance. While there is some analyst coverage, the company is probably not widely covered. So it could gain more attention, down the track.

Insider Ownership Of Riken Keiki

The definition of an insider can differ slightly between different countries, but members of the board of directors always count. 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.

We can report that insiders do own shares in Riken Keiki Co., Ltd.. In their own names, insiders own JP¥1.3b worth of stock in the JP¥124b 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

The general public, who are usually individual investors, hold a 27% stake in Riken Keiki. 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

We can see that Private Companies own 5.6%, of the shares on issue. It might be worth looking deeper into this. If related parties, such as insiders, have an interest in one of these private companies, that should be disclosed in the annual report. Private companies may also have a strategic interest in the company.

Public Company Ownership

Public companies currently own 3.1% of Riken Keiki stock. It's hard to say for sure but this suggests they have entwined business interests. This might be a strategic stake, so it's worth watching this space for changes in ownership.

Next Steps:

It's always worth thinking about the different groups who own shares in a company. But to understand Riken Keiki better, we need to consider many other factors.

I like to dive deeper into how a company has performed in the past. You can find historic revenue and earnings in this detailed graph.

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.