Institutional investors may overlook Westamerica Bancorporation's (NASDAQ:WABC) recent US$70m market cap drop as long-term gains remain positive

Key Insights

• Given the large stake in the stock by institutions, Westamerica Bancorporation's stock price might be vulnerable to their trading decisions
• The top 8 shareholders own 51% of the company
• Using data from analyst forecasts alongside ownership research, one can better assess the future performance of a company

To get a sense of who is truly in control of Westamerica Bancorporation (NASDAQ:WABC), it is important to understand the ownership structure of the business. The group holding the most number of shares in the company, around 78% to be precise, is institutions. In other words, the group stands to gain the most (or lose the most) from their investment into the company.

Losing money on investments is something no shareholder enjoys, least of all institutional investors who saw their holdings value drop by 5.0% last week. However, the 17% one-year returns may have helped alleviate their overall losses. But they would probably be wary of future losses.

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

Check out our latest analysis for Westamerica Bancorporation

What Does The Institutional Ownership Tell Us About Westamerica Bancorporation?

Institutional investors commonly compare their own returns to the returns of a commonly followed index. So they generally do consider buying larger companies that are included in the relevant benchmark index.

We can see that Westamerica Bancorporation 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 Westamerica Bancorporation's historic earnings and revenue below, but keep in mind there's always more to the story.

Investors should note that institutions actually own more than half the company, so they can collectively wield significant power. Hedge funds don't have many shares in Westamerica Bancorporation. The company's largest shareholder is BlackRock, Inc., with ownership of 14%. The Vanguard Group, Inc. is the second largest shareholder owning 13% of common stock, and American Century Investment Management Inc holds about 7.1% of the company stock. Additionally, the company's CEO David Payne directly holds 4.2% of the total shares outstanding.

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 Westamerica Bancorporation

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.

We can see that insiders own shares in Westamerica Bancorporation. This is a big company, so it is good to see this level of alignment. Insiders own US$61m worth of shares (at current prices). 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

With a 17% ownership, the general public, mostly comprising of individual investors, have some degree of sway over Westamerica Bancorporation. 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.

Next Steps:

It's always worth thinking about the different groups who own shares in a company. But to understand Westamerica Bancorporation better, we need to consider many other factors. Be aware that Westamerica Bancorporation is showing 1 warning sign in our investment analysis , you should know about...

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.