Institutional owners may take dramatic actions as Atlas Copco AB (publ)'s (STO:ATCO A) recent 3.8% drop adds to one-year losses

Key Insights

• Given the large stake in the stock by institutions, Atlas Copco's stock price might be vulnerable to their trading decisions
• A total of 24 investors have a majority stake in the company with 50% ownership
• Insiders have bought recently

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A look at the shareholders of Atlas Copco AB (publ) (STO:ATCO A) can tell us which group is most powerful. And the group that holds the biggest piece of the pie are institutions with 44% ownership. That is, the group stands to benefit the most if the stock rises (or lose the most if there is a downturn).

And so it follows that institutional investors was the group most impacted after the company's market cap fell to kr714b last week after a 3.8% drop in the share price. Needless to say, the recent loss which further adds to the one-year loss to shareholders of 23% 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 decline continues, institutional investors may be pressured to sell Atlas Copco which might hurt individual investors.

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

View our latest analysis for Atlas Copco

What Does The Institutional Ownership Tell Us About Atlas Copco?

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.

We can see that Atlas Copco does have institutional investors; and they hold a good portion of the company's stock. 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 Atlas Copco's historic earnings and revenue below, but keep in mind there's always more to the story.

Atlas Copco is not owned by hedge funds. Our data shows that Investor AB (publ) is the largest shareholder with 17% of shares outstanding. For context, the second largest shareholder holds about 5.0% of the shares outstanding, followed by an ownership of 3.4% by the third-largest shareholder.

After doing some more digging, we found that the top 24 have the combined ownership of 50% in the company, suggesting that no single shareholder has significant control over the company.

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 Atlas Copco

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

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 information suggests that Atlas Copco AB (publ) insiders own under 1% of the company. However, it's possible that insiders might have an indirect interest through a more complex structure. Being so large, we would not expect insiders to own a large proportion of the stock. Collectively, they own kr199m 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, who are usually individual investors, hold a 37% stake in Atlas Copco. 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 Equity Ownership

Private equity firms hold a 17% stake in Atlas Copco. This suggests they can be influential in key policy decisions. Some investors might be encouraged by this, since private equity are sometimes able to encourage strategies that help the market see the value in the company. Alternatively, those holders might be exiting the investment after taking it public.

Next Steps:

While it is well worth considering the different groups that own a company, there are other factors that are even more important.

Many find it useful to take an in depth look at how a company has performed in the past. You can access this detailed graph of past earnings, revenue and cash flow.

But ultimately it is the future, not the past, that will determine how well the owners of this business will do. Therefore we think it advisable to take a look at this free report showing whether analysts are predicting a brighter 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.