Apollo Commercial Real Estate Finance, Inc.'s (NYSE:ARI) institutional investors lost 5.1% over the past week but have profited from longer-term gains
Key Insights
Significantly high institutional ownership implies Apollo Commercial Real Estate Finance's stock price is sensitive to their trading actions
50% of the business is held by the top 15 shareholders
Every investor in Apollo Commercial Real Estate Finance, Inc. (NYSE:ARI) should be aware of the most powerful shareholder groups. And the group that holds the biggest piece of the pie are institutions with 59% ownership. Put another way, the group faces the maximum upside potential (or downside risk).
Losing money on investments is something no shareholder enjoys, least of all institutional investors who saw their holdings value drop by 5.1% last week. However, the 12% one-year return to shareholders might have softened the blow. But they would probably be wary of future losses.
Let's delve deeper into each type of owner of Apollo Commercial Real Estate Finance, beginning with the chart below.
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.
As you can see, institutional investors have a fair amount of stake in Apollo Commercial Real Estate Finance. 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. This risk is higher in a company without a history of growth. You can see Apollo Commercial Real Estate Finance's historic earnings and revenue below, but keep in mind there's always more to the story.
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. The company's largest shareholder is BlackRock, Inc., with ownership of 16%. 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.
A closer look at our ownership figures suggests that the top 15 shareholders have a combined ownership of 50% implying that no single shareholder has a majority.
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 a reasonable number of analysts covering the stock, so it might be useful to find out their aggregate view on the future.
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.
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 Apollo Commercial Real Estate Finance, Inc. in their own names. However, it's possible that insiders might have an indirect interest through a more complex structure. It's a big company, so even a small proportional interest can create alignment between the board and shareholders. In this case insiders own US$9.5m worth of shares. It is good to see board members owning shares, but it might be worth checking if those insiders have been buying.
General Public Ownership
With a 35% ownership, the general public, mostly comprising of individual investors, have some degree of sway over Apollo Commercial Real Estate Finance. 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.
Private Company Ownership
Our data indicates that Private Companies hold 5.9%, of the company's shares. Private companies may be related parties. Sometimes insiders have an interest in a public company through a holding in a private company, rather than in their own capacity as an individual. While it's hard to draw any broad stroke conclusions, it is worth noting as an area for further research.
Next Steps:
It's always worth thinking about the different groups who own shares in a company. But to understand Apollo Commercial Real Estate Finance better, we need to consider many other factors. For instance, we've identified 3 warning signs for Apollo Commercial Real Estate Finance (2 are significant) that you should be aware of.
If you are like me, you may want to think about whether this company will grow or shrink. Luckily, you can check this free report showing analyst forecasts for its future.
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.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.
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.
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