Institutional investors may overlook Alcoa Corporation's (NYSE:AA) recent US$424m market cap drop as long-term gains remain positive

Key Insights

• Given the large stake in the stock by institutions, Alcoa's stock price might be vulnerable to their trading decisions
• 50% of the business is held by the top 16 shareholders
• Ownership research along with analyst forecasts data help provide a good understanding of opportunities in a stock

To get a sense of who is truly in control of Alcoa Corporation (NYSE:AA), it is important to understand the ownership structure of the business. The group holding the most number of shares in the company, around 85% to be precise, is institutions. In other words, the group stands to gain the most (or lose the most) from their investment into the company.

Institutional investors endured the highest losses after the company's market cap fell by US$424m last week. However, the 12% one-year return to shareholders might have softened the blow. They should, however, be mindful of further losses in the future.

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

Check out our latest analysis for Alcoa

What Does The Institutional Ownership Tell Us About Alcoa?

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.

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. It is not uncommon to see a big share price drop if two large institutional investors try to sell out of a stock at the same time. So it is worth checking the past earnings trajectory of Alcoa, (below). Of course, keep in mind that there are other factors to consider, too.

Since institutional investors own more than half the issued stock, the board will likely have to pay attention to their preferences. Alcoa is not owned by hedge funds. The company's largest shareholder is BlackRock, Inc., with ownership of 12%. The Vanguard Group, Inc. is the second largest shareholder owning 10% of common stock, and State Street Global Advisors, Inc. holds about 4.5% of the company stock.

After doing some more digging, we found that the top 16 have the combined ownership of 50% in the company, suggesting that no single shareholder has significant control over the company.

While it makes sense to study institutional ownership data for a company, it also makes sense to study analyst sentiments to know which way the wind is blowing. There are plenty of analysts covering the stock, so it might be worth seeing what they are forecasting, too.

Insider Ownership Of Alcoa

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.

We can report that insiders do own shares in Alcoa Corporation. It is a pretty big company, so it is generally a positive to see some potentially meaningful alignment. In this case, they own around US$78m worth of shares (at current prices). Most would say this shows alignment of interests between shareholders and the board. Still, it might be worth checking if those insiders have been selling.

General Public Ownership

With a 14% ownership, the general public, mostly comprising of individual investors, have some degree of sway over Alcoa. This size of ownership, while considerable, may not be enough to change company policy if the decision is not in sync with other large shareholders.

Next Steps:

While it is well worth considering the different groups that own a company, there are other factors that are even more important.

I always like to check for a history of revenue growth. You can too, by accessing this free chart of historic revenue and earnings in this detailed graph.

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. 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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com