Institutional investors in Norsk Hydro ASA (OB:NHY) lost 4.1% last week but have reaped the benefits of longer-term growth

Key Insights

• Significantly high institutional ownership implies Norsk Hydro's stock price is sensitive to their trading actions
• The top 5 shareholders own 51% of the company
• Analyst forecasts along with ownership data serve to give a strong idea about prospects for a business

Every investor in Norsk Hydro ASA (OB:NHY) should be aware of the most powerful shareholder groups. And the group that holds the biggest piece of the pie are institutions with 42% ownership. In other words, the group stands to gain the most (or lose the most) from their investment into the company.

Institutional investors endured the highest losses after the company's market cap fell by kr5.5b last week. However, the 26% one-year returns may have helped alleviate their overall losses. We would assume however, that they would be on the lookout for weakness in the future.

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

View our latest analysis for Norsk Hydro

What Does The Institutional Ownership Tell Us About Norsk Hydro?

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.

Norsk Hydro 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. If multiple institutions change their view on a stock at the same time, you could see the share price drop fast. It's therefore worth looking at Norsk Hydro's earnings history below. Of course, the future is what really matters.

Norsk Hydro is not owned by hedge funds. The company's largest shareholder is Narings- Og Handelsdepartementet, with ownership of 35%. For context, the second largest shareholder holds about 6.1% of the shares outstanding, followed by an ownership of 5.5% by the third-largest shareholder.

To make our study more interesting, we found that the top 5 shareholders control more than half of the company which implies that this group has considerable sway over the company's decision-making.

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

Insider Ownership Of Norsk Hydro

The definition of company insiders can be subjective and does vary between jurisdictions. Our data reflects individual insiders, capturing board members at the very least. 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.

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 information suggests that Norsk Hydro ASA insiders own under 1% of the company. Being so large, we would not expect insiders to own a large proportion of the stock. Collectively, they own kr42m 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 23% ownership, the general public, mostly comprising of individual investors, have some degree of sway over Norsk Hydro. 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 Norsk Hydro better, we need to consider many other factors. Consider for instance, the ever-present spectre of investment risk. We've identified 2 warning signs with Norsk Hydro (at least 1 which shouldn't be ignored) , and understanding them should be part of your investment process.

If you are like me, you may want to think about whether this company will grow or shrink. Luckily, you can check this free report showing analyst forecasts for its 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.