Institutional investors may overlook Argan, Inc.'s (NYSE:AGX) recent US$84m market cap drop as long-term gains remain positive

Key Insights

• Institutions' substantial holdings in Argan implies that they have significant influence over the company's share price
• The top 15 shareholders own 51% of the company
• Recent sales by insiders

If you want to know who really controls Argan, Inc. (NYSE:AGX), then you'll have to look at the makeup of its share registry. We can see that institutions own the lion's share in the company with 83% ownership. That is, the group stands to benefit the most if the stock rises (or lose the most if there is a downturn).

No shareholder likes losing money on their investments, especially institutional investors who saw their holdings drop 4.1% in value last week. Still, the 217% one-year gains may have helped mitigate their overall losses. They should, however, be mindful of further losses in the future.

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

See our latest analysis for Argan

What Does The Institutional Ownership Tell Us About Argan?

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.

As you can see, institutional investors have a fair amount of stake in Argan. 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. It is not uncommon to see a big share price drop if two large institutional investors try to sell out of a stock at the same time. So it is worth checking the past earnings trajectory of Argan, (below). Of course, keep in mind that there are other factors to consider, too.

Since institutional investors own more than half the issued stock, the board will likely have to pay attention to their preferences. Hedge funds don't have many shares in Argan. Looking at our data, we can see that the largest shareholder is BlackRock, Inc. with 8.6% of shares outstanding. In comparison, the second and third largest shareholders hold about 6.2% and 4.8% of the stock.

A closer look at our ownership figures suggests that the top 15 shareholders have a combined ownership of 51% implying that no single shareholder has a majority.

While it makes sense to study institutional ownership data for a company, it also makes sense to study analyst sentiments to know which way the wind is blowing. There is a little analyst coverage of the stock, but not much. So there is room for it to gain more coverage.

Insider Ownership Of Argan

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

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.

Shareholders would probably be interested to learn that insiders own shares in Argan, Inc.. This is a big company, so it is good to see this level of alignment. Insiders own US$91m worth of shares (at current prices). If you would like to explore the question of insider alignment, you can click here to see if insiders have been buying or selling.

General Public Ownership

With a 12% ownership, the general public, mostly comprising of individual investors, have some degree of sway over Argan. 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.

Next Steps:

It's always worth thinking about the different groups who own shares in a company. But to understand Argan better, we need to consider many other factors. Consider risks, for instance. Every company has them, and we've spotted 1 warning sign for Argan you should know about.

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.