Following a 5.6% decline over last year, recent gains may please Riken Keiki Co., Ltd. (TSE:7734) institutional owners

Key Insights

• Given the large stake in the stock by institutions, Riken Keiki's stock price might be vulnerable to their trading decisions
• The top 11 shareholders own 51% of the company
• Using data from company's past performance alongside ownership research, one can better assess the future performance of a company

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Every investor in Riken Keiki Co., Ltd. (TSE:7734) should be aware of the most powerful shareholder groups. The group holding the most number of shares in the company, around 54% to be precise, is institutions. Put another way, the group faces the maximum upside potential (or downside risk).

Institutional investors would probably welcome last week's 17% increase in the share price after a year of 5.6% losses as a sign that returns may to begin trending higher.

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

See our latest analysis for Riken Keiki

What Does The Institutional Ownership Tell Us About Riken Keiki?

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

Since institutional investors own more than half the issued stock, the board will likely have to pay attention to their preferences. Riken Keiki is not owned by hedge funds. Capital Research and Management Company is currently the largest shareholder, with 7.0% of shares outstanding. In comparison, the second and third largest shareholders hold about 5.7% and 5.3% of the stock.

Looking at the shareholder registry, we can see that 51% of the ownership is controlled by the top 11 shareholders, meaning that no single shareholder has a majority interest in the ownership.

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. There is a little analyst coverage of the stock, but not much. So there is room for it to gain more coverage.

Insider Ownership Of Riken Keiki

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.

Insider ownership is positive when it signals leadership are thinking like the true owners of the company. However, high insider ownership can also give immense power to a small group within the company. This can be negative in some circumstances.

Shareholders would probably be interested to learn that insiders own shares in Riken Keiki Co., Ltd.. The insiders have a meaningful stake worth JP¥1.9b. Most would see this as a real positive. Most would say this shows alignment of interests between shareholders and the board. Still, it might be worth checking if those insiders have been selling.

General Public Ownership

The general public, who are usually individual investors, hold a 29% 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

It seems that Private Companies own 5.7%, of the Riken Keiki 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.

Public Company Ownership

We can see that public companies hold 3.1% of the Riken Keiki 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.

I like to dive deeper into how a company has performed in the past. You can access this interactive graph of past earnings, revenue and cash flow, for free.

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.