Institutional investors may overlook Newmont Corporation's (NYSE:NEM) recent US$3.3b market cap drop as long-term gains remain positive

Key Insights

• Institutions' substantial holdings in Newmont implies that they have significant influence over the company's share price
• 50% of the business is held by the top 23 shareholders
• Ownership research along with analyst forecasts data help provide a good understanding of opportunities in a stock

Our free stock report includes 2 warning signs investors should be aware of before investing in Newmont. Read for free now.

If you want to know who really controls Newmont Corporation (NYSE:NEM), 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 78% to be precise, is institutions. Put another way, the group faces the maximum upside potential (or downside risk).

Institutional investors was the group most impacted after the company's market cap fell to US$54b last week. However, the 19% one-year return to shareholders may have helped lessen their pain. But they would probably be wary of future losses.

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

See our latest analysis for Newmont

What Does The Institutional Ownership Tell Us About Newmont?

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 Newmont does have institutional investors; and they hold a good portion of the company's stock. This suggests some credibility amongst professional investors. But we can't rely on that fact alone since institutions make bad investments sometimes, just like everyone does. 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 Newmont's earnings history below. Of course, the future is what really matters.

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 Newmont. Looking at our data, we can see that the largest shareholder is The Vanguard Group, Inc. with 12% of shares outstanding. BlackRock, Inc. is the second largest shareholder owning 11% of common stock, and State Street Global Advisors, Inc. holds about 4.6% of the company stock.

After doing some more digging, we found that the top 23 have the combined ownership of 50% in the company, suggesting that no single shareholder has significant control over the company.

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. There are a reasonable number of analysts covering the stock, so it might be useful to find out their aggregate view on the future.

Insider Ownership Of Newmont

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 data suggests that insiders own under 1% of Newmont Corporation in their own names. It is a very large company, so it would be surprising to see insiders own a large proportion of the company. Though their holding amounts to less than 1%, we can see that board members collectively own US$55m worth of shares (at current prices). In this sort of situation, it can be more interesting to see if those insiders have been buying or selling.

General Public Ownership

With a 22% ownership, the general public, mostly comprising of individual investors, have some degree of sway over Newmont. 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:

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 Newmont (at least 1 which is a bit unpleasant) , and understanding them should be part of your investment process.

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.