Positive week for Western Digital Corporation (NASDAQ:WDC) institutional investors who lost 19% over the past year

By
Simply Wall St
Published
February 21, 2022
NasdaqGS:WDC
Source: Shutterstock

If you want to know who really controls Western Digital Corporation (NASDAQ:WDC), then you'll have to look at the makeup of its share registry. With 82% stake, institutions possess the maximum shares in the company. That is, the group stands to benefit the most if the stock rises (or lose the most if there is a downturn).

Last week's US$563m market cap gain would probably be appreciated by institutional investors, especially after a year of 19% losses.

In the chart below, we zoom in on the different ownership groups of Western Digital.

View our latest analysis for Western Digital

ownership-breakdown
NasdaqGS:WDC Ownership Breakdown February 21st 2022

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.

We can see that Western Digital 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 Western Digital, (below). Of course, keep in mind that there are other factors to consider, too.

earnings-and-revenue-growth
NasdaqGS:WDC Earnings and Revenue Growth February 21st 2022

Since institutional investors own more than half the issued stock, the board will likely have to pay attention to their preferences. Western Digital is not owned by hedge funds. Looking at our data, we can see that the largest shareholder is The Vanguard Group, Inc. with 11% of shares outstanding. Meanwhile, the second and third largest shareholders, hold 8.0% and 4.0%, of the shares outstanding, respectively.

A closer look at our ownership figures suggests that the top 18 shareholders have a combined ownership of 51% implying that no single shareholder has a majority.

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 Western Digital

The definition of an insider can differ slightly between different countries, but members of the board of directors always count. 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 information suggests that Western Digital Corporation insiders own under 1% of the company. 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$50m worth of shares (at current prices). Arguably recent buying and selling is just as important to consider. You can click here to see if insiders have been buying or selling.

General Public Ownership

The general public, who are usually individual investors, hold a 18% stake in Western Digital. While this group can't necessarily call the shots, it can certainly have a real influence on how the company is run.

Next Steps:

It's always worth thinking about the different groups who own shares in a company. But to understand Western Digital better, we need to consider many other factors. Consider risks, for instance. Every company has them, and we've spotted 3 warning signs for Western Digital you should know about.

Ultimately the future is most important. You can access this free report on analyst forecasts for the company.

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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