Silicon Motion Technology Corporation's (NASDAQ:SIMO) recent 5.4% pullback adds to one-year year losses, institutional owners may take drastic measures

Key Insights

• Significantly high institutional ownership implies Silicon Motion Technology's stock price is sensitive to their trading actions
• 51% of the business is held by the top 21 shareholders
• Ownership research along with analyst forecasts data help provide a good understanding of opportunities in a stock

Every investor in Silicon Motion Technology Corporation (NASDAQ:SIMO) should be aware of the most powerful shareholder groups. We can see that institutions own the lion's share in the company with 83% 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$107m. This set of investors may especially be concerned about the current loss, which adds to a one-year loss of 17% for shareholders. Institutions or "liquidity providers" control large sums of money and therefore, these types of investors usually have a lot of influence over stock price movements. Hence, if weakness in Silicon Motion Technology's share price continues, institutional investors may feel compelled to sell the stock, which might not be ideal for individual investors.

In the chart below, we zoom in on the different ownership groups of Silicon Motion Technology.

See our latest analysis for Silicon Motion Technology

What Does The Institutional Ownership Tell Us About Silicon Motion Technology?

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 Silicon Motion Technology 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. 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 Silicon Motion Technology, (below). Of course, keep in mind that there are other factors to consider, too.

Investors should note that institutions actually own more than half the company, so they can collectively wield significant power. Hedge funds don't have many shares in Silicon Motion Technology. Our data shows that FMR LLC is the largest shareholder with 6.5% of shares outstanding. In comparison, the second and third largest shareholders hold about 3.9% and 3.8% of the stock. Additionally, the company's CEO Chia-Chang Kou directly holds 1.3% of the total shares outstanding.

After doing some more digging, we found that the top 21 have the combined ownership of 51% in the company, suggesting that no single shareholder has significant control over the company.

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 Silicon Motion Technology

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.

Insider ownership is positive when it signals leadership are thinking like the true owners of the company. However, high insider ownership can also give immense power to a small group within the company. This can be negative in some circumstances.

Our most recent data indicates that insiders own some shares in Silicon Motion Technology Corporation. This is a big company, so it is good to see this level of alignment. Insiders own US$58m 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

The general public, who are usually individual investors, hold a 14% stake in Silicon Motion Technology. 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. Take risks for example - Silicon Motion Technology has 1 warning sign we think you should be aware of.

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.

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

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.