Royal Caribbean Cruises Ltd.'s (NYSE:RCL) high institutional ownership speaks for itself as stock continues to impress, up 6.6% over last week

Key Insights

• Given the large stake in the stock by institutions, Royal Caribbean Cruises' stock price might be vulnerable to their trading decisions
• 51% of the business is held by the top 5 shareholders
• Insiders have sold recently

A look at the shareholders of Royal Caribbean Cruises Ltd. (NYSE:RCL) can tell us which group is most powerful. And the group that holds the biggest piece of the pie are institutions with 82% ownership. Put another way, the group faces the maximum upside potential (or downside risk).

Last week’s 6.6% gain means that institutional investors were on the positive end of the spectrum even as the company has shown strong longer-term trends. The gains from last week would have further boosted the one-year return to shareholders which currently stand at 95%.

In the chart below, we zoom in on the different ownership groups of Royal Caribbean Cruises.

See our latest analysis for Royal Caribbean Cruises

What Does The Institutional Ownership Tell Us About Royal Caribbean Cruises?

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 Royal Caribbean Cruises. This implies the analysts working for those institutions have looked at the stock and they like it. But just like anyone else, they could be wrong. 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 Royal Caribbean Cruises' historic earnings and revenue below, but keep in mind there's always more to the story.

Institutional investors own over 50% of the company, so together than can probably strongly influence board decisions. Royal Caribbean Cruises is not owned by hedge funds. Capital Research and Management Company is currently the largest shareholder, with 27% of shares outstanding. The Vanguard Group, Inc. is the second largest shareholder owning 9.6% of common stock, and BlackRock, Inc. holds about 6.2% of the company stock.

Our research also brought to light the fact that roughly 51% of the company is controlled by the top 5 shareholders suggesting that these owners wield significant influence on the business.

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 Royal Caribbean Cruises

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.

Insider ownership is positive when it signals leadership are thinking like the true owners of the company. However, high insider ownership can also give immense power to a small group within the company. This can be negative in some circumstances.

Our information suggests that Royal Caribbean Cruises Ltd. insiders own under 1% of the company. However, it's possible that insiders might have an indirect interest through a more complex structure. It is a very large company, so it would be surprising to see insiders own a large proportion of the company. Though their holding amounts to less than 1%, we can see that board members collectively own US$232m worth of shares (at current prices). It is always good to see at least some insider ownership, but it might be worth checking if those insiders have been selling.

General Public Ownership

The general public-- including retail investors -- own 12% stake in the company, and hence can't easily be ignored. While this group can't necessarily call the shots, it can certainly have a real influence on how the company is run.

Private Company Ownership

Our data indicates that Private Companies hold 5.3%, of the company's shares. It's hard to draw any conclusions from this fact alone, so its worth looking into who owns those private companies. Sometimes insiders or other related parties have an interest in shares in a public company through a separate private company.

Next Steps:

I find it very interesting to look at who exactly owns a company. But to truly gain insight, we need to consider other information, too. Take risks for example - Royal Caribbean Cruises has 3 warning signs (and 1 which is a bit unpleasant) we think you should know about.

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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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.