In This Article:
Key Insights
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Significantly high institutional ownership implies RLI's stock price is sensitive to their trading actions
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A total of 12 investors have a majority stake in the company with 50% ownership
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Using data from analyst forecasts alongside ownership research, one can better assess the future performance of a company
A look at the shareholders of RLI Corp. (NYSE:RLI) can tell us which group is most powerful. With 81% stake, institutions possess the maximum shares in the company. That is, the group stands to benefit the most if the stock rises (or lose the most if there is a downturn).
Institutional investors was the group most impacted after the company's market cap fell to US$8.1b last week. However, the 30% one-year return to shareholders might have softened the blow. But they would probably be wary of future losses.
In the chart below, we zoom in on the different ownership groups of RLI.
See our latest analysis for RLI
What Does The Institutional Ownership Tell Us About RLI?
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 RLI. 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 RLI's historic earnings and revenue below, but keep in mind there's always more to the story.
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 RLI. The Vanguard Group, Inc. is currently the company's largest shareholder with 10.0% of shares outstanding. Meanwhile, the second and third largest shareholders, hold 9.6% and 8.0%, of the shares outstanding, respectively.
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.
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. Quite a few analysts cover the stock, so you could look into forecast growth quite easily.