Apollo Commercial Real Estate Finance, Inc.'s (NYSE:ARI) high institutional ownership speaks for itself as stock continues to impress, up 4.1% over last week
Key Insights
Given the large stake in the stock by institutions, Apollo Commercial Real Estate Finance's stock price might be vulnerable to their trading decisions
The top 17 shareholders own 50% of the company
To get a sense of who is truly in control of Apollo Commercial Real Estate Finance, Inc. (NYSE:ARI), it is important to understand the ownership structure of the business. The group holding the most number of shares in the company, around 57% to be precise, is institutions. Put another way, the group faces the maximum upside potential (or downside risk).
Last week’s 4.1% gain means that institutional investors were on the positive end of the spectrum even as the company has shown strong longer-term trends. The one-year return on investment is currently 11% and last week's gain would have been more than welcomed.
Let's take a closer look to see what the different types of shareholders can tell us about Apollo Commercial Real Estate Finance.
See our latest analysis for Apollo Commercial Real Estate Finance
What Does The Institutional Ownership Tell Us About Apollo Commercial Real Estate Finance?
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 Apollo Commercial Real Estate Finance 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. If multiple institutions change their view on a stock at the same time, you could see the share price drop fast. It's therefore worth looking at Apollo Commercial Real Estate Finance's earnings history below. Of course, the future is what really matters.
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 Apollo Commercial Real Estate Finance. Our data shows that BlackRock, Inc. is the largest shareholder with 16% of shares outstanding. The Vanguard Group, Inc. is the second largest shareholder owning 11% of common stock, and QH RE Asset Company LLC holds about 5.9% of the company stock.
After doing some more digging, we found that the top 17 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. Quite a few analysts cover the stock, so you could look into forecast growth quite easily.
Insider Ownership Of Apollo Commercial Real Estate Finance
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.
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 information suggests that Apollo Commercial Real Estate Finance, Inc. insiders own under 1% of the company. But they may have an indirect interest through a corporate structure that we haven't picked up on. Keep in mind that it's a big company, and the insiders own US$9.3m worth of shares. The absolute value might be more important than the proportional share. It is good to see board members owning shares, but it might be worth checking if those insiders have been buying.
General Public Ownership
The general public, who are usually individual investors, hold a 36% stake in Apollo Commercial Real Estate Finance. 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.
Private Company Ownership
Our data indicates that Private Companies hold 5.9%, of the company's shares. It might be worth looking deeper into this. If related parties, such as insiders, have an interest in one of these private companies, that should be disclosed in the annual report. Private companies may also have a strategic interest in the company.
Next Steps:
I find it very interesting to look at who exactly owns a company. But to truly gain insight, we need to consider other information, too. Be aware that Apollo Commercial Real Estate Finance is showing 2 warning signs in our investment analysis , and 1 of those is a bit concerning...
Ultimately the future is most important. You can access this free report on analyst forecasts for the company.
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.
