Lam Research Corporation's (NASDAQ:LRCX) recent 5.1% pullback adds to one-year year losses, institutional owners may take drastic measures

By
Simply Wall St
Published
April 14, 2022
NasdaqGS:LRCX
Source: Shutterstock

A look at the shareholders of Lam Research Corporation (NASDAQ:LRCX) can tell us which group is most powerful. We can see that institutions own the lion's share in the company with 84% ownership. That is, the group stands to benefit the most if the stock rises (or lose the most if there is a downturn).

As a result, institutional investors endured the highest losses last week after market cap fell by US$3.6b. Needless to say, the recent loss which further adds to the one-year loss to shareholders of 25% might not go down well especially with this category of 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 Lam Research, which might have negative implications on individual investors.

Let's delve deeper into each type of owner of Lam Research, beginning with the chart below.

View our latest analysis for Lam Research

ownership-breakdown
NasdaqGS:LRCX Ownership Breakdown April 14th 2022

What Does The Institutional Ownership Tell Us About Lam Research?

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.

Lam Research 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. 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 Lam Research, (below). Of course, keep in mind that there are other factors to consider, too.

earnings-and-revenue-growth
NasdaqGS:LRCX Earnings and Revenue Growth April 14th 2022

Investors should note that institutions actually own more than half the company, so they can collectively wield significant power. Lam Research is not owned by hedge funds. The Vanguard Group, Inc. is currently the largest shareholder, with 8.2% of shares outstanding. For context, the second largest shareholder holds about 8.0% of the shares outstanding, followed by an ownership of 4.7% by the third-largest shareholder.

Looking at the shareholder registry, we can see that 50% of the ownership is controlled by the top 24 shareholders, meaning that no single shareholder has a majority interest in the ownership.

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. Quite a few analysts cover the stock, so you could look into forecast growth quite easily.

Insider Ownership Of Lam Research

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. 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.

Most consider insider ownership a positive because it can indicate the board is well aligned with other shareholders. However, on some occasions too much power is concentrated within this group.

Our most recent data indicates that insiders own less than 1% of Lam Research Corporation. 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$194m worth of shares (at current prices). It is good to see board members owning shares, but it might be worth checking if those insiders have been buying.

General Public Ownership

With a 16% ownership, the general public, mostly comprising of individual investors, have some degree of sway over Lam Research. While this group can't necessarily call the shots, it can certainly have a real influence on how the company is run.

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. Case in point: We've spotted 1 warning sign for Lam Research you should be aware of.

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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