Institutional investors may adopt severe steps after American Vanguard Corporation's (NYSE:AVD) latest 11% drop adds to a year losses

Key Insights

• Significantly high institutional ownership implies American Vanguard's stock price is sensitive to their trading actions
• 51% of the business is held by the top 17 shareholders
• Insiders have sold recently

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To get a sense of who is truly in control of American Vanguard Corporation (NYSE:AVD), it is important to understand the ownership structure of the business. We can see that institutions own the lion's share in the company with 71% ownership. Put another way, the group faces the maximum upside potential (or downside risk).

And institutional investors saw their holdings value drop by 11% last week. This set of investors may especially be concerned about the current loss, which adds to a one-year loss of 2.3% for shareholders. Also referred to as "smart money", institutions have a lot of sway over how a stock's price moves. As a result, if the downtrend continues, institutions may face pressures to sell American Vanguard, which might have negative implications on individual investors.

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

Check out our latest analysis for American Vanguard

What Does The Institutional Ownership Tell Us About American Vanguard?

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.

American Vanguard already has institutions on the share registry. Indeed, they own a respectable stake in the company. 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 American Vanguard's historic earnings and revenue below, but keep in mind there's always more to the story.

Since institutional investors own more than half the issued stock, the board will likely have to pay attention to their preferences. American Vanguard is not owned by hedge funds. The company's largest shareholder is BlackRock, Inc., with ownership of 6.7%. The second and third largest shareholders are Wellington Management Group LLP and The Vanguard Group, Inc., with an equal amount of shares to their name at 5.5%. Additionally, the company's CEO Douglas Kaye directly holds 1.0% of the total shares outstanding.

After doing some more digging, we found that the top 17 have the combined ownership of 51% 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. While there is some analyst coverage, the company is probably not widely covered. So it could gain more attention, down the track.

Insider Ownership Of American Vanguard

The definition of an insider can differ slightly between different countries, but members of the board of directors always count. The company management answer to the board and the latter should represent the interests of shareholders. Notably, sometimes top-level managers are on the board themselves.

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.

Shareholders would probably be interested to learn that insiders own shares in American Vanguard Corporation. It has a market capitalization of just US$148m, and insiders have US$9.5m worth of shares, in their own names. It is good to see some investment by insiders, but we usually like to see higher insider holdings. It might be worth checking if those insiders have been buying.

General Public Ownership

The general public-- including retail investors -- own 23% stake in the company, and hence can't easily be ignored. 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:

It's always worth thinking about the different groups who own shares in a company. But to understand American Vanguard better, we need to consider many other factors. For example, we've discovered 1 warning sign for American Vanguard that you should be aware of before investing here.

If you would prefer discover what analysts are predicting in terms of future growth, do not miss this free report on analyst forecasts.

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.