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

In this article, I will describe how I assess changes in institutional ownership of a company’s stock.

I focus on two groups of stock owners: the on-the-radar investors and the corporate insiders. For more information on the different types of shareholders I consider, please refer to the article: Insider Stock Ownership – Which Exclusive Type of Stock Owners Are Your Fellow Shareholders

Company Ownership Evaluation of On-The-Radar Investors

On-the-radar investors include institutional owners, mutual funds, and investors holding at least 5% of a stock. These investors are required to report their insider stock holdings to relevant authorities.

When evaluating the shares owned by on-the-radar investors, I specifically focus on the shares owned by institutional holders and mutual funds. (If an institution or mutual fund owns at least 5% of a company’s stock, I include their ownership in the assessment too.) These groups have the greatest impact on sudden buying or selling pressure, so it’s important to understand their position in a specific stock.

I do not focus on investors who own at least 5% of a company’s total shares outstanding because I believe they tend to hold their shares for the long term. These investors can be individuals or related companies.

Calculating Ownership Change

The best way to evaluate institutional ownership is to calculate the change in ownership between the two most recent periods. This helps determine if the on-the-radar investors’ total ownership has increased, decreased, or remained the same.

To determine if the ownership of on-the-radar investors is substantial or not, divide the institutional ownership by the total shares outstanding. For my institutional ownership assessment, I use the following reference table:

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

Company Ownership Evaluation of Corporate Insiders

To evaluate insider ownership, please refer to my article : Insider Ownership Analysis – Are the Interests of Management and the Common Shareholders Aligned.

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