American States Water Company's (NYSE:AWR) recent 3.6% pullback adds to one-year year losses, institutional owners may take drastic measures

Key Insights

• Given the large stake in the stock by institutions, American States Water's stock price might be vulnerable to their trading decisions
• The top 8 shareholders own 51% of the company
• Insiders have bought recently

If you want to know who really controls American States Water Company (NYSE:AWR), then you'll have to look at the makeup of its share registry. And the group that holds the biggest piece of the pie are institutions with 78% ownership. Put another way, the group faces the maximum upside potential (or downside risk).

As a result, institutional investors endured the highest losses last week after market cap fell by US$112m. Needless to say, the recent loss which further adds to the one-year loss to shareholders of 1.4% 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 American States Water, which might have negative implications on individual investors.

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

Check out our latest analysis for American States Water

What Does The Institutional Ownership Tell Us About American States Water?

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.

American States Water 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. When multiple institutions own a stock, there's always a risk that they are in a 'crowded trade'. When such a trade goes wrong, multiple parties may compete to sell stock fast. This risk is higher in a company without a history of growth. You can see American States Water's historic earnings and revenue below, but keep in mind there's always more to the story.

Since institutional investors own more than half the issued stock, the board will likely have to pay attention to their preferences. American States Water is not owned by hedge funds. BlackRock, Inc. is currently the largest shareholder, with 18% of shares outstanding. The Vanguard Group, Inc. is the second largest shareholder owning 13% of common stock, and State Street Global Advisors, Inc. holds about 8.9% of the company stock.

We did some more digging and found that 8 of the top shareholders account for roughly 51% of the register, implying that along with larger shareholders, there are a few smaller shareholders, thereby balancing out each others interests somewhat.

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 American States Water

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.

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 American States Water Company. It's a big company, so even a small proportional interest can create alignment between the board and shareholders. In this case insiders own US$29m worth of shares. It is always good to see at least some insider ownership, but it might be worth checking if those insiders have been selling.

General Public Ownership

With a 21% ownership, the general public, mostly comprising of individual investors, have some degree of sway over American States Water. 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 American States Water better, we need to consider many other factors. Case in point: We've spotted 2 warning signs for American States Water you should be aware of, and 1 of them is a bit unpleasant.

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.

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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.