- United States
- Metals and Mining
Institutional investors may adopt severe steps after Alcoa Corporation's (NYSE:AA) latest 17% drop adds to a year losses
- Given the large stake in the stock by institutions, Alcoa's stock price might be vulnerable to their trading decisions
- A total of 15 investors have a majority stake in the company with 51% ownership
- Recent sales by insiders
If you want to know who really controls Alcoa Corporation (NYSE:AA), then you'll have to look at the makeup of its share registry. With 84% stake, institutions possess the maximum shares in the company. Put another way, the group faces the maximum upside potential (or downside risk).
And institutional investors endured the highest losses after the company's share price fell by 17% last week. Needless to say, the recent loss which further adds to the one-year loss to shareholders of 39% might not go down well especially with this category of 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 Alcoa, which might have negative implications on individual investors.
Let's delve deeper into each type of owner of Alcoa, beginning with the chart below.
View our latest analysis for Alcoa
What Does The Institutional Ownership Tell Us About Alcoa?
Institutions typically measure themselves against a benchmark when reporting to their own investors, so they often become more enthusiastic about a stock once it's included in a major index. We would expect most companies to have some institutions on the register, especially if they are growing.
We can see that Alcoa 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. 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 Alcoa'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 Alcoa. The company's largest shareholder is BlackRock, Inc., with ownership of 12%. Meanwhile, the second and third largest shareholders, hold 9.9% and 4.5%, of the shares outstanding, respectively.
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 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. Quite a few analysts cover the stock, so you could look into forecast growth quite easily.
Insider Ownership Of Alcoa
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. Company management run the business, but the CEO will answer to the board, even if he or she is a member of it.
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 most recent data indicates that insiders own less than 1% of Alcoa Corporation. Keep in mind that it's a big company, and the insiders own US$56m worth of shares. The absolute value might be more important than the proportional share. 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, who are usually individual investors, hold a 16% stake in Alcoa. While this size of ownership may not be enough to sway a policy decision in their favour, they can still make a collective impact on company policies.
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 1 warning sign for Alcoa that you should be aware of before investing here.
But ultimately it is the future, not the past, that will determine how well the owners of this business will do. Therefore we think it advisable to take a look at this free report showing whether analysts are predicting a brighter 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. 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.
Alcoa Corporation, together with its subsidiaries, produces and sells bauxite, alumina, and aluminum products in the United States, Spain, Australia, Iceland, Norway, Brazil, Canada, and internationally.
Excellent balance sheet and fair value.