Yahoo Finance After a year of 6.6% returns, Universal Display Corporation's (NASDAQ:OLED) share price drop last week may have less of an impact on institutional investors
Key Insights
Given the large stake in the stock by institutions, Universal Display's stock price might be vulnerable to their trading decisions
The top 14 shareholders own 50% of the company
To get a sense of who is truly in control of Universal Display Corporation (NASDAQ:OLED), it is important to understand the ownership structure of the business. And the group that holds the biggest piece of the pie are institutions with 80% ownership. In other words, the group stands to gain the most (or lose the most) from their investment into the company.
Institutional investors endured the highest losses after the company's market cap fell by US$463m last week. Still, the 6.6% one-year gains may have helped mitigate their overall losses. But they would probably be wary of future losses.
In the chart below, we zoom in on the different ownership groups of Universal Display.
Check out our latest analysis for Universal Display
What Does The Institutional Ownership Tell Us About Universal Display?
Institutional investors commonly compare their own returns to the returns of a commonly followed index. So they generally do consider buying larger companies that are included in the relevant benchmark index.
Universal Display already has institutions on the share registry. Indeed, they own a respectable stake in the company. This implies the analysts working for those institutions have looked at the stock and they like it. But just like anyone else, they could be wrong. 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 Universal Display's earnings history below. Of course, the future is what really matters.
Investors should note that institutions actually own more than half the company, so they can collectively wield significant power. Universal Display is not owned by hedge funds. Our data shows that The Vanguard Group, Inc. is the largest shareholder with 9.5% of shares outstanding. With 8.5% and 5.5% of the shares outstanding respectively, BlackRock, Inc. and Estate Of Sherwin I. Seligsohn are the second and third largest shareholders.
Looking at the shareholder registry, we can see that 50% of the ownership is controlled by the top 14 shareholders, meaning that no single shareholder has a majority interest in the ownership.
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. Quite a few analysts cover the stock, so you could look into forecast growth quite easily.
Insider Ownership Of Universal Display
While the precise definition of an insider can be subjective, almost everyone considers board members to be insiders. 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 see that insiders own shares in Universal Display Corporation. This is a big company, so it is good to see this level of alignment. Insiders own US$127m worth of shares (at current prices). Most would say this shows alignment of interests between shareholders and the board. Still, it might be worth checking if those insiders have been selling.
General Public Ownership
With a 13% ownership, the general public, mostly comprising of individual investors, have some degree of sway over Universal Display. While this group can't necessarily call the shots, it can certainly have a real influence on how the company is run.
Private Company Ownership
It seems that Private Companies own 5.7%, of the Universal Display stock. It might be worth looking deeper into this. If related parties, such as insiders, have an interest in one of these private companies, that should be disclosed in the annual report. Private companies may also have a strategic interest in the company.
Next Steps:
I find it very interesting to look at who exactly owns a company. But to truly gain insight, we need to consider other information, too. Consider for instance, the ever-present spectre of investment risk. We've identified 2 warning signs with Universal Display (at least 1 which doesn't sit too well with us) , and understanding them should be part of your investment process.
But ultimately it is the future, not the past, that will determine how well the owners of this business will do. Therefore we think it advisable to take a look at this free report showing whether analysts are predicting a brighter future.
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.
