Newpark Resources, Inc.'s (NYSE:NR) high institutional ownership speaks for itself as stock continues to impress, up 12% over last week

Key Insights

• Given the large stake in the stock by institutions, Newpark Resources' stock price might be vulnerable to their trading decisions
• A total of 8 investors have a majority stake in the company with 51% ownership
• Insiders have been buying lately

To get a sense of who is truly in control of Newpark Resources, Inc. (NYSE:NR), it is important to understand the ownership structure of the business. And the group that holds the biggest piece of the pie are institutions with 65% ownership. That is, the group stands to benefit the most if the stock rises (or lose the most if there is a downturn).

And last week, institutional investors ended up benefitting the most after the company hit US$425m in market cap. The one-year return on investment is currently 25% and last week's gain would have been more than welcomed.

In the chart below, we zoom in on the different ownership groups of Newpark Resources.

See our latest analysis for Newpark Resources

What Does The Institutional Ownership Tell Us About Newpark Resources?

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.

Newpark Resources 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. 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 Newpark Resources' 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. It looks like hedge funds own 6.7% of Newpark Resources shares. That's interesting, because hedge funds can be quite active and activist. Many look for medium term catalysts that will drive the share price higher. Columbia Management Investment Advisers, LLC is currently the largest shareholder, with 10% of shares outstanding. With 9.5% and 6.9% of the shares outstanding respectively, Bradley Radoff and BlackRock, Inc. are the second and third largest shareholders.

We did some more digging and found that 8 of the top shareholders account for roughly 51% 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. Our information suggests that there isn't any analyst coverage of the stock, so it is probably little known.

Insider Ownership Of Newpark Resources

The definition of company insiders can be subjective and does vary between jurisdictions. Our data reflects individual insiders, capturing board members at the very least. 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.

Most consider insider ownership a positive because it can indicate the board is well aligned with other shareholders. However, on some occasions too much power is concentrated within this group.

Our most recent data indicates that insiders own a reasonable proportion of Newpark Resources, Inc.. Insiders own US$60m worth of shares in the US$425m company. It is great to see insiders so invested in the business. It might be worth checking if those insiders have been buying recently.

General Public Ownership

With a 14% ownership, the general public, mostly comprising of individual investors, have some degree of sway over Newpark Resources. While this group can't necessarily call the shots, it can certainly have a real influence on how the company is run.

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. Consider for instance, the ever-present spectre of investment risk. We've identified 2 warning signs with Newpark Resources , and understanding them should be part of your investment process.

Of course this may not be the best stock to buy. So take a peek at this free free list of interesting companies.

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.