Institutional owners may consider drastic measures as EDP - Energias de Portugal, S.A.'s (ELI:EDP) recent €699m drop adds to long-term losses

Key Insights

• Significantly high institutional ownership implies EDP - Energias de Portugal's stock price is sensitive to their trading actions
• A total of 8 investors have a majority stake in the company with 50% ownership
• Analyst forecasts along with ownership data serve to give a strong idea about prospects for a business

Every investor in EDP - Energias de Portugal, S.A. (ELI:EDP) should be aware of the most powerful shareholder groups. With 38% stake, institutions possess the maximum shares in the company. In other words, the group stands to gain the most (or lose the most) from their investment into the company.

And institutional investors endured the highest losses after the company's share price fell by 4.4% last week. The recent loss, which adds to a one-year loss of 16% for stockholders, may not sit well with this group of investors. Also referred to as "smart money", institutions have a lot of sway over how a stock's price moves. As a result, if the decline continues, institutional investors may be pressured to sell EDP - Energias de Portugal which might hurt individual investors.

Let's delve deeper into each type of owner of EDP - Energias de Portugal, beginning with the chart below.

Check out our latest analysis for EDP - Energias de Portugal

What Does The Institutional Ownership Tell Us About EDP - Energias de Portugal?

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.

EDP - Energias de Portugal 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 EDP - Energias de Portugal's historic earnings and revenue below, but keep in mind there's always more to the story.

Hedge funds don't have many shares in EDP - Energias de Portugal. China Three Gorges Corporation is currently the company's largest shareholder with 21% of shares outstanding. The second and third largest shareholders are Corporación Masaveu SA and BlackRock, Inc., with an equal amount of shares to their name at 6.9%.

We also observed that the top 8 shareholders account for more than half of the share register, with a few smaller shareholders to balance the interests of the larger ones to a certain extent.

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 a reasonable number of analysts covering the stock, so it might be useful to find out their aggregate view on the future.

Insider Ownership Of EDP - Energias de Portugal

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.

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.

Our information suggests that EDP - Energias de Portugal, S.A. insiders own under 1% of the company. We do note, however, it is possible insiders have an indirect interest through a private company or other corporate structure. Being so large, we would not expect insiders to own a large proportion of the stock. Collectively, they own €2.5m of stock. It is good to see board members owning shares, but it might be worth checking if those insiders have been buying.

General Public Ownership

The general public-- including retail investors -- own 34% 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.

Private Company Ownership

Our data indicates that Private Companies hold 28%, of the company's shares. 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.

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. Case in point: We've spotted 2 warning signs for EDP - Energias de Portugal you should be aware of, and 1 of them doesn't sit too well with us.

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.