Institutional investors have a lot riding on Applied Optoelectronics, Inc. (NASDAQ:AAOI) with 69% ownership

Key Insights

• Institutions' substantial holdings in Applied Optoelectronics implies that they have significant influence over the company's share price
• The top 19 shareholders own 50% of the company
• Insiders have bought recently

Every investor in Applied Optoelectronics, Inc. (NASDAQ:AAOI) should be aware of the most powerful shareholder groups. With 69% stake, institutions possess the maximum shares in the company. Put another way, the group faces the maximum upside potential (or downside risk).

And as as result, institutional investors reaped the most rewards after the company's stock price gained 22% last week. One-year return to shareholders is currently 26% and last week’s gain was the icing on the cake.

Let's take a closer look to see what the different types of shareholders can tell us about Applied Optoelectronics.

Check out our latest analysis for Applied Optoelectronics

What Does The Institutional Ownership Tell Us About Applied Optoelectronics?

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.

Applied Optoelectronics already has institutions on the share registry. Indeed, they own a respectable stake in the company. 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 Applied Optoelectronics, (below). Of course, keep in mind that there are other factors to consider, too.

Since institutional investors own more than half the issued stock, the board will likely have to pay attention to their preferences. Hedge funds don't have many shares in Applied Optoelectronics. The company's largest shareholder is The Vanguard Group, Inc., with ownership of 5.0%. Point72 Asset Management, L.P. is the second largest shareholder owning 3.9% of common stock, and Alyeska Investment Group, L.P. holds about 3.8% of the company stock. Furthermore, CEO Chih-Hsiang Lin is the owner of 2.2% of the company's shares.

Looking at the shareholder registry, we can see that 50% of the ownership is controlled by the top 19 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. 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 Applied Optoelectronics

While the precise definition of an insider can be subjective, almost everyone considers board members to be insiders. 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.

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.

We can report that insiders do own shares in Applied Optoelectronics, Inc.. As individuals, the insiders collectively own US$26m worth of the US$463m company. This shows at least some alignment. You can click here to see if those insiders have been buying or selling.

General Public Ownership

The general public-- including retail investors -- own 25% stake in the company, and hence can't easily be ignored. While this size of ownership may not be enough to sway a policy decision in their favour, they can still make a collective impact on company policies.

Next Steps:

It's always worth thinking about the different groups who own shares in a company. But to understand Applied Optoelectronics better, we need to consider many other factors. Be aware that Applied Optoelectronics is showing 4 warning signs in our investment analysis , you should know about...

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.

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