Institutions' substantial holdings in American Electric Power Company implies that they have significant influence over the company's share price
A total of 25 investors have a majority stake in the company with 50% ownership
Using data from analyst forecasts alongside ownership research, one can better assess the future performance of a company
Every investor in American Electric Power Company, Inc. (NASDAQ:AEP) should be aware of the most powerful shareholder groups. We can see that institutions own the lion's share in the company with 75% ownership. Put another way, the group faces the maximum upside potential (or downside risk).
After a year of 9.5% losses, last week’s 3.3% gain would be welcomed by institutional investors as a possible sign that returns might start trending higher.
Let's take a closer look to see what the different types of shareholders can tell us about American Electric Power Company.
NasdaqGS:AEP Ownership Breakdown December 16th 2023
What Does The Institutional Ownership Tell Us About American Electric Power Company?
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.
We can see that American Electric Power Company does have institutional investors; and they hold a good portion of the company's stock. 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. 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 American Electric Power Company, (below). Of course, keep in mind that there are other factors to consider, too.
NasdaqGS:AEP Earnings and Revenue Growth December 16th 2023
Investors should note that institutions actually own more than half the company, so they can collectively wield significant power. We note that hedge funds don't have a meaningful investment in American Electric Power Company. The company's largest shareholder is The Vanguard Group, Inc., with ownership of 9.3%. With 8.2% and 5.4% of the shares outstanding respectively, BlackRock, Inc. and Wellington Management Group LLP are the second and third largest shareholders.
On studying our ownership data, we found that 25 of the top shareholders collectively own less than 50% of the share register, implying that no single individual has a majority interest.
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 plenty of analysts covering the stock, so it might be worth seeing what they are forecasting, too.
Insider Ownership Of American Electric Power Company
While the precise definition of an insider can be subjective, almost everyone considers board members to be insiders. 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 data suggests that insiders own under 1% of American Electric Power Company, Inc. in their own names. Being so large, we would not expect insiders to own a large proportion of the stock. Collectively, they own US$31m of stock. Arguably recent buying and selling is just as important to consider. You can click here to see if insiders have been buying or selling.
General Public Ownership
The general public-- including retail investors -- own 25% stake in the company, and hence can't easily be ignored. This size of ownership, while considerable, may not be enough to change company policy if the decision is not in sync with other large shareholders.
Next Steps:
While it is well worth considering the different groups that own a company, there are other factors that are even more important. Like risks, for instance. Every company has them, and we've spotted 3 warning signs for American Electric Power Company (of which 1 is a bit concerning!) you should know about.
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.
