Significantly high institutional ownership implies American Electric Power Company's stock price is sensitive to their trading actions
50% of the business is held by the top 25 shareholders
Analyst forecasts along with ownership data serve to give a strong idea about prospects for a business
A look at the shareholders of American Electric Power Company, Inc. (NASDAQ:AEP) can tell us which group is most powerful. With 78% stake, institutions possess the maximum shares in the company. In other words, the group stands to gain the most (or lose the most) from their investment into the company.
Because institutional owners have a huge pool of resources and liquidity, their investing decisions tend to carry a great deal of weight, especially with individual investors. Therefore, a good portion of institutional money invested in the company is usually a huge vote of confidence on its future.
Let's delve deeper into each type of owner of American Electric Power Company, beginning with the chart below.
NasdaqGS:AEP Ownership Breakdown November 30th 2024
What Does The Institutional Ownership Tell Us About American Electric Power Company?
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 American Electric Power Company. 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 American Electric Power Company's historic earnings and revenue below, but keep in mind there's always more to the story.
NasdaqGS:AEP Earnings and Revenue Growth November 30th 2024
Since institutional investors own more than half the issued stock, the board will likely have to pay attention to their preferences. American Electric Power Company is not owned by hedge funds. Looking at our data, we can see that the largest shareholder is The Vanguard Group, Inc. with 9.6% of shares outstanding. For context, the second largest shareholder holds about 8.2% of the shares outstanding, followed by an ownership of 5.1% by the third-largest shareholder.
After doing some more digging, we found that the top 25 have the combined ownership of 50% in the company, suggesting that no single shareholder has significant control over the company.
While it makes sense to study institutional ownership data for a company, it also makes sense to study analyst sentiments to know which way the wind is blowing. There are plenty of analysts covering the stock, so it might be worth seeing what they are forecasting, too.
Insider Ownership Of American Electric Power Company
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.
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.
Our most recent data indicates that insiders own less than 1% of American Electric Power Company, Inc.. As it is a large company, we'd only expect insiders to own a small percentage of it. But it's worth noting that they own US$35m worth of shares. 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 22% ownership, the general public, mostly comprising of individual investors, have some degree of sway over American Electric Power Company. 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.
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.
