Under Armour, Inc.'s (NYSE:UAA) recent 4.5% pullback adds to one-year year losses, institutional owners may take drastic measures

By
Simply Wall St
Published
February 24, 2022
NYSE:UAA
Source: Shutterstock

Every investor in Under Armour, Inc. (NYSE:UAA) should be aware of the most powerful shareholder groups. The group holding the most number of shares in the company, around 74% to be precise, is institutions. That is, the group stands to benefit the most if the stock rises (or lose the most if there is a downturn).

As a result, institutional investors endured the highest losses last week after market cap fell by US$352m. Needless to say, the recent loss which further adds to the one-year loss to shareholders of 27% might not go down well especially with this category of shareholders. Institutions or "liquidity providers" control large sums of money and therefore, these types of investors usually have a lot of influence over stock price movements. As a result, if the decline continues, institutional investors may be pressured to sell Under Armour which might hurt individual investors.

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

Check out our latest analysis for Under Armour

ownership-breakdown
NYSE:UAA Ownership Breakdown February 24th 2022

What Does The Institutional Ownership Tell Us About Under Armour?

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.

Under Armour 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. 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 Under Armour, (below). Of course, keep in mind that there are other factors to consider, too.

earnings-and-revenue-growth
NYSE:UAA Earnings and Revenue Growth February 24th 2022

Investors should note that institutions actually own more than half the company, so they can collectively wield significant power. We note that hedge funds don't have a meaningful investment in Under Armour. Because actions speak louder than words, we consider it a good sign when insiders own a significant stake in a company. In Under Armour's case, its Top Key Executive, Kevin Plank, is the largest shareholder, holding 14% of shares outstanding. Meanwhile, the second and third largest shareholders, hold 9.1% and 4.8%, of the shares outstanding, respectively.

Looking at the shareholder registry, we can see that 51% of the ownership is controlled by the top 11 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 Under Armour

While the precise definition of an insider can be subjective, almost everyone considers board members to be insiders. 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 insiders maintain a significant holding in Under Armour, Inc.. It is very interesting to see that insiders have a meaningful US$1.0b stake in this US$7.0b business. Most would be pleased to see the board is investing alongside them. You may wish to access this free chart showing recent trading by insiders.

General Public Ownership

The general public, who are usually individual investors, hold a 11% stake in Under Armour. 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:

While it is well worth considering the different groups that own a company, there are other factors that are even more important. Consider for instance, the ever-present spectre of investment risk. We've identified 2 warning signs with Under Armour , and understanding them should be part of your investment process.

Ultimately the future is most important. You can access this free report on analyst forecasts for the company.

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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