Yahoo Finance Institutional investors must be pleased after a 11% gain last week that adds to Schrödinger, Inc.'s (NASDAQ:SDGR) one-year returns
Key Insights
Given the large stake in the stock by institutions, Schrödinger's stock price might be vulnerable to their trading decisions
A total of 10 investors have a majority stake in the company with 51% ownership
Analyst forecasts along with ownership data serve to give a strong idea about prospects for a business
Every investor in Schrödinger, Inc. (NASDAQ:SDGR) should be aware of the most powerful shareholder groups. We can see that institutions own the lion's share in the company with 79% ownership. That is, the group stands to benefit the most if the stock rises (or lose the most if there is a downturn).
Last week’s 11% gain means that institutional investors were on the positive end of the spectrum even as the company has shown strong longer-term trends. The gains from last week would have further boosted the one-year return to shareholders which currently stand at 3.5%.
In the chart below, we zoom in on the different ownership groups of Schrödinger.
View our latest analysis for Schrödinger
What Does The Institutional Ownership Tell Us About Schrödinger?
Institutions typically measure themselves against a benchmark when reporting to their own investors, so they often become more enthusiastic about a stock once it's included in a major index. We would expect most companies to have some institutions on the register, especially if they are growing.
As you can see, institutional investors have a fair amount of stake in Schrödinger. This suggests some credibility amongst professional investors. But we can't rely on that fact alone since institutions make bad investments sometimes, just like everyone does. When multiple institutions own a stock, there's always a risk that they are in a 'crowded trade'. When such a trade goes wrong, multiple parties may compete to sell stock fast. This risk is higher in a company without a history of growth. You can see Schrödinger's historic earnings and revenue below, but keep in mind there's always more to the story.
Institutional investors own over 50% of the company, so together than can probably strongly influence board decisions. Schrödinger is not owned by hedge funds. The company's largest shareholder is BlackRock, Inc., with ownership of 12%. With 9.7% and 9.4% of the shares outstanding respectively, Bill & Melinda Gates Foundation Trust and The Vanguard Group, Inc. are the second and third largest shareholders.
We also observed that the top 10 shareholders account for more than half of the share register, with a few smaller shareholders to balance the interests of the larger ones to a certain extent.
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. There are plenty of analysts covering the stock, so it might be worth seeing what they are forecasting, too.
Insider Ownership Of Schrödinger
The definition of an insider can differ slightly between different countries, but members of the board of directors always count. Company management run the business, but the CEO will answer to the board, even if he or she is a member of it.
Most consider insider ownership a positive because it can indicate the board is well aligned with other shareholders. However, on some occasions too much power is concentrated within this group.
We can see that insiders own shares in Schrödinger, Inc.. The insiders have a meaningful stake worth US$42m. Most would see this as a real positive. If you would like to explore the question of insider alignment, you can click here to see if insiders have been buying or selling.
General Public Ownership
The general public, who are usually individual investors, hold a 18% stake in Schrödinger. While this group can't necessarily call the shots, it can certainly have a real influence on how the company is run.
Next Steps:
It's always worth thinking about the different groups who own shares in a company. But to understand Schrödinger better, we need to consider many other factors. Consider for instance, the ever-present spectre of investment risk. We've identified 2 warning signs with Schrödinger (at least 1 which is concerning) , and understanding them should be part of your investment process.
Ultimately the future is most important. You can access this free report on analyst forecasts for the company.
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.
