Institutional Ownership Assessment – How I Assess the Shares Owned by Institutions

In this institutional ownership assessment article, I inform you how I assess the change in the institutions’ stock holdings.

As I already explained in the article: Insider Stock Ownership – Which Exclusive Type of Stock Owners Are Your Fellow Shareholders, I do not consider the holdings of the off-the-radar investors (i.e. the private investors) to be relevant, as their individual holdings in a specific stock are normally relatively small. Therefore I only evaluate the company ownership of the other two stock owner groups: the on-the-radar investors and the corporate insiders.

Company Ownership Evaluation of On-The-Radar Investors

The on-the-radar investors are obliged to report their insider stock holdings to the relevant authorities. This ownership group consists of institutional owners, mutual funds and investors owing at least 5% of a certain stock. When I am assessing the shares owned by on-the-radar investors, I only assess the shares owned by the institutional holders and mutual funds. If an institution or a mutual fund is holding at least 5% of the company’s stock, I will include their ownership in this assessment too. The reason for excluding individuals and related companies who own at least 5% of the company’s total shares outstanding, is that I believe they have the intention to hold their shares for the longer term.

Although these professional investors can often spend more time and resources on their due diligence compared to a typical private investor, this does not necessarily mean the professional investors will outperform the private investor’s investment results.

I believe the best way to evaluate the institutional ownership, is by calculating the ownership change between the two most recent periods, to see if their total ownership has increased, decreased, or if their ownership maintained around the same percentage. For my institutional ownership assessment, I have created the following reference table:

Ownership Change  Rating 
< -5%  Negative 
-5% – +5%  Neutral 
> +5%  Positive 

To find out how I evaluate the insider ownership, I refer you to this article: Insider Ownership Analysis – Are the Interests of Management and the Common Shareholders Aligned.

Note: Always interpret the institutional ownership in conjunction with the total shares outstanding, to determine if the ownership of the on-the-radar investors is substantial or not.


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