Could Western Digital Corporation’s (NASDAQ:WDC) Investor Composition Influence The Stock Price?

A look at the shareholders of Western Digital Corporation (NASDAQ:WDC) can tell us which group is most powerful. Generally speaking, as a company grows, institutions will increase their ownership. Conversely, insiders often decrease their ownership over time. Companies that used to be publicly owned tend to have lower insider ownership.

Western Digital has a market capitalization of US$15b, so it’s too big to fly under the radar. We’d expect to see both institutions and retail investors owning a portion of the company. Our analysis of the ownership of the company, below, shows that institutional investors have bought into the company. Let’s take a closer look to see what the different types of shareholder can tell us about WDC.

View our latest analysis for Western Digital

NasdaqGS:WDC Ownership Summary, November 20th 2019
NasdaqGS:WDC Ownership Summary, November 20th 2019

What Does The Institutional Ownership Tell Us About Western Digital?

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.

Western Digital already has institutions on the share registry. Indeed, they own 88% of the company. This can indicate that the company has a certain degree of credibility in the investment community. However, it is best to be wary of relying on the supposed validation that comes with institutional investors. They too, get it wrong sometimes. 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 Western Digital’s earnings history, below. Of course, the future is what really matters.

NasdaqGS:WDC Income Statement, November 20th 2019
NasdaqGS:WDC Income Statement, November 20th 2019

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 Western Digital. 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 Western Digital

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 most recent data indicates that insiders own less than 1% of Western Digital Corporation. As it is a large company, we’d only expect insiders to own a small percentage of it. But it’s worth noting that they own US$50m worth of shares. 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 11% ownership, the general public have some degree of sway over WDC. 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.

I like to dive deeper into how a company has performed in the past. You can find historic revenue and earnings in this detailed graph.

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.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned.

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