NovoCure Limited’s (NASDAQ:NVCR) latest 14% decline adds to one-year losses, institutional investors may consider drastic measures

Important Findings

• Significantly high institutional ownership implies that NovoCure’s stock price is sensitive to its trading activity
• A total of 4 investors hold a majority stake of 52% in the company
• Insiders recently sold

If you want to know who really controls NovoCure Limited (NYSE: NOVOCURE LIMITED), you need to look at the composition of its share register. The group with the most shares in the company, around 81%, is institutions. That is, the group will benefit most when the stock goes up (or lose most when it goes down).

As a result, institutional investors suffered the heaviest losses last week after the market cap fell $964 million. The recent loss, which adds to a 29% annual loss for shareholders, may not sit well with this group of investors. Institutions or “liquidity providers” control large sums of money and therefore these types of investors usually have a large influence on stock price movements. Therefore, if the decline continues, institutional investors could be pressured to sell NovoCure, which could hurt individual investors.

Let’s take a closer look at what the different types of shareholders can tell us about NovoCure.

Check out our latest analysis for NovoCure

What does institutional ownership tell us about NovoCure?

Institutional investors typically compare their own returns to the returns of a commonly tracked index. As such, they typically consider buying larger companies that are included in the relevant benchmark index.

We can see that NovoCure 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. If several institutes change their opinion on a stock at the same time, the share price could fall quickly. It is therefore worth checking out NovoCure’s earnings history below. Of course, what really matters is the future.

With institutional investors owning more than half of the outstanding shares, the board likely needs to be mindful of their preferences. We find that hedge funds have no meaningful investment in NovoCure. Capital Research and Management Company is currently the company’s largest shareholder with 20% of the outstanding shares. By comparison, the second- and third-largest shareholders hold about 15% and 9.1% of the shares, respectively.

Our research also uncovered the fact that approximately 52% of the company is controlled by the four largest shareholders, indicating that these owners exercise significant influence over the company.

Studying institutional ownership is a good way to gauge and filter a stock’s expected performance. The same can be done by studying analyst sentiment. There are many analysts covering the stock, so it might be worth seeing what they’re forecasting as well.

Insider ownership of NovoCure

The definition of an insider may differ slightly from country to country, but board members always count. Management ultimately reports to the board of directors. However, it is not uncommon for managers to be board members, especially if they are founders or CEOs.

Most view insider ownership as a positive, as it can indicate that the board is well aligned with other shareholders. In some cases, however, too much power is concentrated within this group.

We can report that insiders own shares of NovoCure Limited. The insiders have a significant stake worth $75 million. Most would see this as a really positive thing. It’s good to see how much is being invested by insiders. You can check if these insiders have bought recently here.

General Public Property

The general public — including retail investors — own 18% of the shares in the company, so it can’t be ignored. While this group may not necessarily be in charge, it certainly can have a real impact on how the company is run.

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 have identified 3 warning signs for NovoCure (1 is a little worrying) that you should be aware of.

If you’re like me, you might want to think about whether this company is going to grow or shrink. Luckily, you can check out this free report that includes analyst forecasts for the 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 match the figures in the full year report.

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This Simply Wall St article is of a general nature. We provide commentary 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.