Following a 40% decline over last year, recent gains may please Credo Technology Group Holding Ltd (NASDAQ:CRDO) institutional owners

Key Insights

• Given the large stake in the stock by institutions, Credo Technology Group Holding's stock price might be vulnerable to their trading decisions
• A total of 8 investors have a majority stake in the company with 50% ownership
• Insiders have been selling lately

If you want to know who really controls Credo Technology Group Holding Ltd (NASDAQ:CRDO), then you'll have to look at the makeup of its share registry. We can see that institutions own the lion's share in the company with 54% ownership. Put another way, the group faces the maximum upside potential (or downside risk).

After a year of 40% losses, last week’s 12% gain would be welcomed by institutional investors as a likely sign that returns might start trending higher.

Let's take a closer look to see what the different types of shareholders can tell us about Credo Technology Group Holding.

View our latest analysis for Credo Technology Group Holding

What Does The Institutional Ownership Tell Us About Credo Technology Group Holding?

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 Credo Technology Group Holding 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. 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 Credo Technology Group Holding's historic earnings and revenue below, but keep in mind there's always more to the story.

Investors should note that institutions actually own more than half the company, so they can collectively wield significant power. We note that hedge funds don't have a meaningful investment in Credo Technology Group Holding. BlackRock, Inc. is currently the largest shareholder, with 8.5% of shares outstanding. Runsheng He is the second largest shareholder owning 8.3% of common stock, and Chi Fung Cheng holds about 8.0% of the company stock. Chi Fung Cheng, who is the third-largest shareholder, also happens to hold the title of Member of the Board of Directors. Furthermore, CEO William Brennan is the owner of 2.9% of the company's shares.

On further inspection, we found that more than half the company's shares are owned by the top 8 shareholders, suggesting that the interests of the larger shareholders are balanced out to an extent by the smaller ones.

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 Credo Technology Group Holding

While the precise definition of an insider can be subjective, almost everyone considers board members to be insiders. 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 information suggests that insiders maintain a significant holding in Credo Technology Group Holding Ltd. It has a market capitalization of just US$1.4b, and insiders have US$450m worth of shares in their own names. That's quite significant. Most would say this shows a good degree of alignment with shareholders, especially in a company of this size. You can click here to see if those insiders have been buying or selling.

General Public Ownership

With a 11% ownership, the general public, mostly comprising of individual investors, have some degree of sway over Credo Technology Group Holding. 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 risks, for instance. Every company has them, and we've spotted 3 warning signs for Credo Technology Group Holding you should know about.

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.