TheQuartering [10/26/2023]
- Significantly high institutional ownership implies Walt Disney’s stock price is sensitive to their trading actions
- 36% of the business is held by the top 25 shareholders
- Ownership research along with analyst forecasts data help provide a good understanding of opportunities in a stock
A look at the shareholders of The Walt Disney Company (NYSE:DIS) can tell us which group is most powerful. We can see that institutions own the lion’s share in the company with 64% ownership. Put another way, the group faces the maximum upside potential (or downside risk).
And so it follows that institutional investors was the group most impacted after the company’s market cap fell to US$152b last week after a 3.0% drop in the share price. The recent loss, which adds to a one-year loss of 18% for stockholders, may not sit well with this group of investors. Institutions or “liquidity providers” control large sums of money and therefore, these types of investors usually have a lot of influence over stock price movements. Hence, if weakness in Walt Disney’s share price continues, institutional investors may feel compelled to sell the stock, which might not be ideal for individual investors.
Let’s take a closer look to see what the different types of shareholders can tell us about Walt Disney.
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.
We can see that Walt Disney does have institutional investors; and they hold a good portion of the company’s stock. This can indicate that the company has a certain degree of credibility in the investment community. However, it is best to be wary of relying on the supposed validation that comes with institutional investors. They too, get it wrong sometimes. 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.