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Given the large stake in the stock by institutions, NVIDIA’s stock price might be vulnerable to their trading decisions
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45% of the business is held by the top 25 shareholders
A look at the shareholders of NVIDIA Corporation (NASDAQ:NVDA) can tell us which group is most powerful. We can see that institutions own the lion’s share in the company with 66% ownership. That is, the group stands to benefit the most if the stock rises (or lose the most if there is a downturn).
Institutional investors was the group most impacted after the company’s market cap fell to US$3.3t last week. Still, the 195% one-year gains may have helped mitigate their overall losses. We would assume however, that they would be on the lookout for weakness in the future.
Let’s take a closer look to see what the different types of shareholders can tell us about NVIDIA.
Check out our latest analysis for NVIDIA
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.
As you can see, institutional investors have a fair amount of stake in NVIDIA. 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 NVIDIA’s earnings history below. Of course, the future is what really matters.
Institutional investors own over 50% of the company, so together than can probably strongly influence board decisions. NVIDIA is not owned by hedge funds. The Vanguard Group, Inc. is currently the company’s largest shareholder with 8.7% of shares outstanding. In comparison, the second and third largest shareholders hold about 7.5% and 4.0% of the stock. Additionally, the company’s CEO Jen-Hsun Huang directly holds 3.5% of the total shares outstanding.
Our studies suggest that the top 25 shareholders collectively control less than half of the company’s shares, meaning that the company’s shares are widely disseminated and there is no dominant shareholder.
While studying institutional ownership for a company can add value to your research, it is also a good practice to research analyst recommendations to get a deeper understand of a stock’s expected performance. There are plenty of analysts covering the stock, so it might be worth seeing what they are forecasting, too.
The definition of an insider can differ slightly between different countries, but members of the board of directors always count. Company management run the business, but the CEO will answer to the board, even if he or she is a member of it.
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.
We can report that insiders do own shares in NVIDIA Corporation. The insiders have a meaningful stake worth US$128b. Most would say this shows a good alignment of interests between shareholders and the board. Still, it might be worth checking if those insiders have been selling.
The general public– including retail investors — own 30% 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.
It’s always worth thinking about the different groups who own shares in a company. But to understand NVIDIA better, we need to consider many other factors. Case in point: We’ve spotted 2 warning signs for NVIDIA you should be aware of, and 1 of them makes us a bit uncomfortable.
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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