ARMOUR Residential REIT, Inc.'s (NYSE:ARR) latest 5.2% decline adds to one-year losses, institutional investors may consider drastic measures

Key Insights

• Significantly high institutional ownership implies ARMOUR Residential REIT's stock price is sensitive to their trading actions
• The top 25 shareholders own 45% of the company
• Analyst forecasts along with ownership data serve to give a strong idea about prospects for a business

We've discovered 2 warning signs about ARMOUR Residential REIT. View them for free.

To get a sense of who is truly in control of ARMOUR Residential REIT, Inc. (NYSE:ARR), it is important to understand the ownership structure of the business. We can see that institutions own the lion's share in the company with 52% ownership. Put another way, the group faces the maximum upside potential (or downside risk).

And institutional investors saw their holdings value drop by 5.2% last week. This set of investors may especially be concerned about the current loss, which adds to a one-year loss of 2.0% for 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 downtrend continues, institutions may face pressures to sell ARMOUR Residential REIT, which might have negative implications on individual investors.

In the chart below, we zoom in on the different ownership groups of ARMOUR Residential REIT.

View our latest analysis for ARMOUR Residential REIT

What Does The Institutional Ownership Tell Us About ARMOUR Residential REIT?

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.

As you can see, institutional investors have a fair amount of stake in ARMOUR Residential REIT. 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 ARMOUR Residential REIT's 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. We note that hedge funds don't have a meaningful investment in ARMOUR Residential REIT. Our data shows that BlackRock, Inc. is the largest shareholder with 14% of shares outstanding. The Vanguard Group, Inc. is the second largest shareholder owning 9.8% of common stock, and State Street Global Advisors, Inc. holds about 2.9% of the company stock.

A deeper look at our ownership data shows that the top 25 shareholders collectively hold less than half of the register, suggesting a large group of small holders where no single shareholder has a majority.

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 ARMOUR Residential REIT

While the precise definition of an insider can be subjective, almost everyone considers board members to be insiders. 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.

Our data suggests that insiders own under 1% of ARMOUR Residential REIT, Inc. in their own names. It's a big company, so even a small proportional interest can create alignment between the board and shareholders. In this case insiders own US$4.5m worth of shares. Arguably, recent buying and selling is just as important to consider. You can click here to see if insiders have been buying or selling.

General Public Ownership

The general public-- including retail investors -- own 48% 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.

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 ARMOUR Residential REIT (1 is a bit concerning!) 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.