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Could American States Water Company's (NYSE:AWR) Investor Composition Influence The Stock Price?

Simply Wall St

Every investor in American States Water Company (NYSE:AWR) should be aware of the most powerful shareholder groups. Large companies usually have institutions as shareholders, and we usually see insiders owning shares in smaller companies. Companies that have been privatized tend to have low insider ownership.

American States Water is a pretty big company. It has a market capitalization of US$3.2b. Normally institutions would own a significant portion of a company this size. Our analysis of the ownership of the company, below, shows that institutional investors have bought into the company. We can zoom in on the different ownership groups, to learn more about AWR.

See our latest analysis for American States Water

NYSE:AWR Ownership Summary, August 26th 2019

What Does The Institutional Ownership Tell Us About American States Water?

Many institutions measure their performance against an index that approximates the local market. So they usually pay more attention to companies that are included in major indices.

American States Water already has institutions on the share registry. Indeed, they own 76% of the company. 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 American States Water's historic earnings and revenue, below, but keep in mind there's always more to the story.

NYSE:AWR Income Statement, August 26th 2019

Since institutional investors own more than half the issued stock, the board will likely have to pay attention to their preferences. Hedge funds don't have many shares in American States Water. Quite a few analysts cover the stock, so you could look into forecast growth quite easily.

Insider Ownership Of American States Water

The definition of company insiders can be subjective, and does vary between jurisdictions. Our data reflects individual insiders, capturing board members at the very least. Management ultimately answers to the board. However, it is not uncommon for managers to be executive board members, especially if they are a founder or the CEO.

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.

Shareholders would probably be interested to learn that insiders own shares in American States Water Company. The insiders have a meaningful stake worth US$44m. Most would see this as a real positive. If you would like to explore the question of insider alignment, you can click here to see if insiders have been buying or selling.

General Public Ownership

With a 23% ownership, the general public have some degree of sway over AWR. 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:

It's always worth thinking about the different groups who own shares in a company. But to understand American States Water better, we need to consider many other factors.

I like to dive deeper into how a company has performed in the past. You can access this interactive graph of past earnings, revenue and cash flow, for free .

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.

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned. Thank you for reading.