- United States
- Medical Equipment
NovoCure Limited's (NASDAQ:NVCR) latest 14% decline adds to one-year losses, institutional investors may consider drastic measures
- Significantly high institutional ownership implies NovoCure's stock price is sensitive to their trading actions
- A total of 4 investors have a majority stake in the company with 52% ownership
- Insiders have sold recently
If you want to know who really controls NovoCure Limited (NASDAQ:NVCR), 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 81% 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).
As a result, institutional investors endured the highest losses last week after market cap fell by US$964m. The recent loss, which adds to a one-year loss of 29% for stockholders, may not sit well with this group of investors. 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 decline continues, institutional investors may be pressured to sell NovoCure which might hurt individual investors.
Let's take a closer look to see what the different types of shareholders can tell us about NovoCure.
View our latest analysis for NovoCure
What Does The Institutional Ownership Tell Us About NovoCure?
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.
We can see that NovoCure does have institutional investors; and they hold a good portion of the company's stock. 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. If multiple institutions change their view on a stock at the same time, you could see the share price drop fast. It's therefore worth looking at NovoCure's earnings history below. Of course, the future is what really matters.
Since institutional investors own more than half the issued stock, the board will likely have to pay attention to their preferences. We note that hedge funds don't have a meaningful investment in NovoCure. Capital Research and Management Company is currently the company's largest shareholder with 20% of shares outstanding. In comparison, the second and third largest shareholders hold about 15% and 9.1% of the stock.
Our research also brought to light the fact that roughly 52% of the company is controlled by the top 4 shareholders suggesting that these owners wield significant influence on the business.
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 plenty of analysts covering the stock, so it might be worth seeing what they are forecasting, too.
Insider Ownership Of NovoCure
The definition of an insider can differ slightly between different countries, but members of the board of directors always count. 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.
We can report that insiders do own shares in NovoCure Limited. The insiders have a meaningful stake worth US$75m. Most would see this as a real positive. It is good to see this level of investment by insiders. You can check here to see if those insiders have been buying recently.
General Public Ownership
The general public-- including retail investors -- own 18% 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.
While it is well worth considering the different groups that own a company, there are other factors that are even more important. For instance, we've identified 3 warning signs for NovoCure (1 is a bit concerning) that you should be aware of.
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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Find out whether NovoCure is potentially over or undervalued by checking out our comprehensive analysis, which includes fair value estimates, risks and warnings, dividends, insider transactions and financial health.View the Free Analysis
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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.
NovoCure Limited, an oncology company, engages in the development, manufacture, and commercialization of tumor treating fields (TTFields) devices for the treatment of solid tumor cancers in the United States, Europe, the Middle East, Africa, Japan, and Greater China.
Excellent balance sheet and overvalued.