Institutional owners may consider drastic measures as Federal Agricultural Mortgage Corporation's (NYSE:AGM) recent US$259m drop adds to long-term losses

Key Insights

• Significantly high institutional ownership implies Federal Agricultural Mortgage's stock price is sensitive to their trading actions
• 51% of the business is held by the top 15 shareholders
• Insiders have been selling lately

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If you want to know who really controls Federal Agricultural Mortgage Corporation (NYSE:AGM), then you'll have to look at the makeup of its share registry. The group holding the most number of shares in the company, around 75% 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).

And institutional investors endured the highest losses after the company's share price fell by 12% last week. This set of investors may especially be concerned about the current loss, which adds to a one-year loss of 8.6% for shareholders. Also referred to as "smart money", institutions have a lot of sway over how a stock's price moves. Hence, if weakness in Federal Agricultural Mortgage's share price continues, institutional investors may feel compelled to sell the stock, which might not be ideal for individual investors.

In the chart below, we zoom in on the different ownership groups of Federal Agricultural Mortgage.

See our latest analysis for Federal Agricultural Mortgage

What Does The Institutional Ownership Tell Us About Federal Agricultural Mortgage?

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.

We can see that Federal Agricultural Mortgage 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 Federal Agricultural Mortgage'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. Federal Agricultural Mortgage is not owned by hedge funds. The company's largest shareholder is BlackRock, Inc., with ownership of 6.9%. With 5.7% and 5.4% of the shares outstanding respectively, FMR LLC and The Vanguard Group, Inc. are the second and third largest shareholders.

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. Quite a few analysts cover the stock, so you could look into forecast growth quite easily.

Insider Ownership Of Federal Agricultural Mortgage

The definition of an insider can differ slightly between different countries, but members of the board of directors always count. Company management run the business, but the CEO will answer to the board, even if he or she is a member of it.

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.

We can see that insiders own shares in Federal Agricultural Mortgage Corporation. This is a big company, so it is good to see this level of alignment. Insiders own US$26m 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 20% ownership, the general public, mostly comprising of individual investors, have some degree of sway over Federal Agricultural Mortgage. 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.

Private Company Ownership

It seems that Private Companies own 4.5%, of the Federal Agricultural Mortgage 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:

While it is well worth considering the different groups that own a company, there are other factors that are even more important. For example, we've discovered 2 warning signs for Federal Agricultural Mortgage (1 shouldn't be ignored!) that you should be aware of before investing here.

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.