How Many Ellington Residential Mortgage REIT (NYSE:EARN) Shares Do Institutions Own?

If you want to know who really controls Ellington Residential Mortgage REIT (NYSE:EARN), then you'll have to look at the makeup of its share registry. Generally speaking, as a company grows, institutions will increase their ownership. Conversely, insiders often decrease their ownership over time. Companies that used to be publicly owned tend to have lower insider ownership.

Ellington Residential Mortgage REIT is not a large company by global standards. It has a market capitalization of US$156m, which means it wouldn't have the attention of many institutional investors. Taking a look at our data on the ownership groups (below), it seems that institutional investors have bought into the company. Let's take a closer look to see what the different types of shareholders can tell us about Ellington Residential Mortgage REIT.

View our latest analysis for Ellington Residential Mortgage REIT

What Does The Institutional Ownership Tell Us About Ellington Residential Mortgage 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 Ellington Residential Mortgage REIT. 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. 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 Ellington Residential Mortgage REIT's historic earnings and revenue below, but keep in mind there's always more to the story.

It would appear that 7.4% of Ellington Residential Mortgage REIT shares are controlled by hedge funds. That catches my attention because hedge funds sometimes try to influence management, or bring about changes that will create near term value for shareholders. The Blackstone Group Inc. is currently the company's largest shareholder with 27% of shares outstanding. For context, the second largest shareholder holds about 7.4% of the shares outstanding, followed by an ownership of 6.9% by the third-largest shareholder.

We did some more digging and found that 6 of the top shareholders account for roughly 54% of the register, implying that along with larger shareholders, there are a few smaller shareholders, thereby balancing out each others interests somewhat.

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. 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 Ellington Residential Mortgage 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.

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 Ellington Residential Mortgage REIT. In their own names, insiders own US$3.9m worth of stock in the US$156m company. It is good to see some investment by insiders, but I usually like to see higher insider holdings. It might be worth checking if those insiders have been buying.

General Public Ownership

The general public holds a 31% stake in Ellington Residential Mortgage REIT. While this group can't necessarily call the shots, it can certainly have a real influence on how the company is run.

Private Equity Ownership

With an ownership of 27%, private equity firms are in a position to play a role in shaping corporate strategy with a focus on value creation. Some investors might be encouraged by this, since private equity are sometimes able to encourage strategies that help the market see the value in the company. Alternatively, those holders might be exiting the investment after taking it public.

Next Steps:

While it is well worth considering the different groups that own a company, there are other factors that are even more important. Take risks for example - Ellington Residential Mortgage REIT has 5 warning signs (and 3 which are concerning) we think you should know about.

If you are like me, you may want to think about whether this company will grow or shrink. Luckily, you can check this free report showing analyst forecasts for its 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. 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.
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