Yahoo Finance In the wake of APA Corporation's (NASDAQ:APA) latest US$382m market cap drop, institutional owners may be forced to take severe actions
Key Insights
Given the large stake in the stock by institutions, APA's stock price might be vulnerable to their trading decisions
50% of the business is held by the top 12 shareholders
Analyst forecasts along with ownership data serve to give a strong idea about prospects for a business
If you want to know who really controls APA Corporation (NASDAQ:APA), then you'll have to look at the makeup of its share registry. We can see that institutions own the lion's share in the company with 75% ownership. That is, the group stands to benefit the most if the stock rises (or lose the most if there is a downturn).
And institutional investors endured the highest losses after the company's share price fell by 3.6% last week. The recent loss, which adds to a one-year loss of 17% for stockholders, may not sit well with this group of investors. Often called “market movers", institutions wield significant power in influencing the price dynamics of any stock. As a result, if the downtrend continues, institutions may face pressures to sell APA, which might have negative implications on individual investors.
Let's delve deeper into each type of owner of APA, beginning with the chart below.
View our latest analysis for APA
What Does The Institutional Ownership Tell Us About APA?
Many institutions measure their performance against an index that approximates the local market. So they usually pay more attention to companies that are included in major indices.
We can see that APA does have institutional investors; and they hold a good portion of the company's stock. 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. It is not uncommon to see a big share price drop if two large institutional investors try to sell out of a stock at the same time. So it is worth checking the past earnings trajectory of APA, (below). Of course, keep in mind that there are other factors to consider, too.
Institutional investors own over 50% of the company, so together than can probably strongly influence board decisions. We note that hedge funds don't have a meaningful investment in APA. The Vanguard Group, Inc. is currently the largest shareholder, with 12% of shares outstanding. BlackRock, Inc. is the second largest shareholder owning 7.3% of common stock, and Hotchkis and Wiley Capital Management, LLC holds about 6.6% of the company stock.
A closer look at our ownership figures suggests that the top 12 shareholders have a combined ownership of 50% implying that no single shareholder has a majority.
Researching institutional ownership is a good way to gauge and filter a stock's expected performance. The same can be achieved by studying analyst sentiments. There are a reasonable number of analysts covering the stock, so it might be useful to find out their aggregate view on the future.
Insider Ownership Of APA
The definition of an insider can differ slightly between different countries, but members of the board of directors always count. The company management answer to the board and the latter should represent the interests of shareholders. Notably, sometimes top-level managers are on the board themselves.
I generally consider insider ownership to be a good thing. However, on some occasions it makes it more difficult for other shareholders to hold the board accountable for decisions.
Our data suggests that insiders own under 1% of APA Corporation in their own names. Being so large, we would not expect insiders to own a large proportion of the stock. Collectively, they own US$45m of stock. In this sort of situation, it can be more interesting to see if those insiders have been buying or selling.
General Public Ownership
With a 24% ownership, the general public, mostly comprising of individual investors, have some degree of sway over APA. While this size of ownership may not be enough to sway a policy decision in their favour, they can still make a collective impact on company policies.
Next Steps:
While it is well worth considering the different groups that own a company, there are other factors that are even more important. Consider for instance, the ever-present spectre of investment risk. We've identified 4 warning signs with APA (at least 2 which make us uncomfortable) , and understanding them should be part of your investment process.
If you would prefer discover what analysts are predicting in terms of future growth, do not miss this free report on analyst forecasts.
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.
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