Institutional investors may adopt severe steps after Alcoa Corporation’s (NYSE:AA) latest 17% drop adds to a year losses

Important Findings

• Given institutions’ large holdings in the stock, Alcoa’s stock price could be vulnerable to their trading decisions
• A total of 15 investors hold a majority stake of 51% in the company
• Recent Insider Sales

If you want to know who really controls Alcoa Corporation (NYSE:AA), you need to look at the composition of the stock register. With 84%, institutions own the maximum shares in the company. In other words, the group is exposed to maximum upside (or downside risk).

And institutional investors suffered the heaviest losses after the company’s share price fell 17% last week. Needless to say, the recent loss, which further adds to shareholders’ one-year loss of 39%, may not go down well with this particular category of shareholders. Institutions or “liquidity providers” control large sums of money and therefore these types of investors usually have a large influence on stock price movements. As a result, if the downtrend continues, institutions could come under pressure to sell Alcoa, which could have a negative impact on individual investors.

Let’s dive deeper into each type of Alcoa owner, starting with the table below.

Check out our latest analysis for Alcoa

What does institutional ownership tell us about Alcoa?

Institutions typically measure themselves against a benchmark when reporting to their own investors, so they’re often more excited about a stock once it’s included in a major index. We would expect most companies to have some institutions on the register, especially as they grow.

We can see that Alcoa has institutional investors; and they hold a good portion of the company’s stock. This means that the analysts who work for these institutes have looked at the stock and like it. But just like everyone else, they can be wrong. When multiple institutions own a stock, there is always a risk that they will find themselves in a “crowded trade”. When such a trade goes awry, multiple parties can compete to sell shares quickly. This risk is higher in a company without a growth history. You can see Alcoa’s historical earnings and earnings below, but remember there’s still more to be told.

Institutional investors own over 50% of the company, so collectively they can likely heavily influence board decisions. We find that hedge funds don’t have a meaningful investment in Alcoa. The company’s largest shareholder is BlackRock, Inc. with a 12% stake. Meanwhile, the second- and third-largest shareholders hold 9.9% and 4.5% of the outstanding shares, respectively.

A closer look at our ownership numbers suggests that the 15 largest shareholders together hold a 51% stake, meaning no single shareholder has the majority.

While examining a company’s institutional ownership can add value to your research, it’s also a good practice to research analyst recommendations to gain a deeper understanding of a stock’s expected performance. Quite a few analysts cover the stock, so you can easily look at the projected growth.

Insider ownership of Alcoa

The definition of corporate insider can be subjective and varies by jurisdiction. Our data reflects individual insiders and captures at least board members. Management runs the business, but the CEO is accountable to the board even if he or she is a member.

In general, I think insider ownership is a good thing. In some cases, however, it becomes more difficult for other shareholders to hold the board accountable for decisions.

Our latest data shows that insiders own less than 1% of Alcoa Corporation. Remember, this is a large company and the insiders own $56 million in stock. The absolute value might be more important than the proportional part. It’s arguably just as important to consider recent buying and selling. You can click here to see if Insiders bought or sold.

General Public Property

The general public, which are typically individual investors, own a 16% stake in Alcoa. While this ownership may not be sufficient to sway a policy decision in their favor, they can still collectively influence company policy.

Next Steps:

While it’s worth considering the different groups that own a business, there are other factors that are even more important. For example, we discovered 1 warning label for Alcoa you should know before you invest here.

But ultimately it is the future, not the past that determines how well the owners of this business will do. Therefore, we think it’s wise to take a look at this free report that shows whether analysts are predicting a brighter future.

Note: The figures in this article are calculated using data for the last twelve months, relating to the 12-month period ending on the last date of the month to which the financial statements are dated. This may not tally with the annual report figures for the full year.

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This Simply Wall St article is of a general nature. We provide comments based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended as financial advice. It is not a recommendation to buy or sell any stock and does not take into account your goals or financial situation. Our goal is to offer you long-term focused analysis based on fundamental data. Note that our analysis may not take into account the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any of the stocks mentioned.