Institutional investors are Realtek Semiconductor Corp.'s (TWSE:2379) biggest bettors and were rewarded after last week's NT$17b market cap gain

Key Insights

• Institutions' substantial holdings in Realtek Semiconductor implies that they have significant influence over the company's share price
• The top 19 shareholders own 50% of the company
• Ownership research along with analyst forecasts data help provide a good understanding of opportunities in a stock

Every investor in Realtek Semiconductor Corp. (TWSE:2379) should be aware of the most powerful shareholder groups. And the group that holds the biggest piece of the pie are institutions with 51% ownership. In other words, the group stands to gain the most (or lose the most) from their investment into the company.

And last week, institutional investors ended up benefitting the most after the company hit NT$291b in market cap. The gains from last week would have further boosted the one-year return to shareholders which currently stand at 30%.

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

Check out our latest analysis for Realtek Semiconductor

What Does The Institutional Ownership Tell Us About Realtek Semiconductor?

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.

We can see that Realtek Semiconductor does have institutional investors; and they hold a good portion of the company's stock. 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 Realtek Semiconductor'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. We note that hedge funds don't have a meaningful investment in Realtek Semiconductor. The company's largest shareholder is Capital Investment Trust Corporation, with ownership of 6.4%. Fubon Life Insurance Co., Ltd., Asset Management Arm is the second largest shareholder owning 4.6% of common stock, and Cotek Pharmaceutical Industry Co., Ltd. holds about 4.3% of the company stock.

Looking at the shareholder registry, we can see that 50% of the ownership is controlled by the top 19 shareholders, meaning that no single shareholder has a majority interest in the ownership.

Researching institutional ownership is a good way to gauge and filter a stock's expected performance. The same can be achieved by studying analyst sentiments. Quite a few analysts cover the stock, so you could look into forecast growth quite easily.

Insider Ownership Of Realtek Semiconductor

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.

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.

We can see that insiders own shares in Realtek Semiconductor Corp.. Insiders own NT$9.1b worth of shares (at current prices). we sometimes take an interest in whether they have been buying or selling.

General Public Ownership

The general public-- including retail investors -- own 38% stake in the company, and hence can't easily be ignored. While this size of ownership may not be enough to sway a policy decision in their favour, they can still make a collective impact on company policies.

Private Company Ownership

It seems that Private Companies own 8.1%, of the Realtek Semiconductor stock. Private companies may be related parties. Sometimes insiders have an interest in a public company through a holding in a private company, rather than in their own capacity as an individual. While it's hard to draw any broad stroke conclusions, it is worth noting as an area for further research.

Next Steps:

It's always worth thinking about the different groups who own shares in a company. But to understand Realtek Semiconductor better, we need to consider many other factors. For instance, we've identified 1 warning sign for Realtek Semiconductor that you should be aware of.

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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.