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Do Insiders Own Lots Of Shares In Applied Optoelectronics, Inc. (NASDAQ:AAOI)?

Simply Wall St

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A look at the shareholders of Applied Optoelectronics, Inc. (NASDAQ:AAOI) can tell us which group is most powerful. Insiders often own a large chunk of younger, smaller, companies while huge companies tend to have institutions as shareholders. I generally like to see some degree of insider ownership, even if only a little. As Nassim Nicholas Taleb said, 'Don’t tell me what you think, tell me what you have in your portfolio.'

Applied Optoelectronics is not a large company by global standards. It has a market capitalization of US$254m, which means it wouldn't have the attention of many institutional investors. Taking a look at our data on the ownership groups (below), it's seems that institutions are noticeable on the share registry. We can zoom in on the different ownership groups, to learn more about AAOI.

See our latest analysis for Applied Optoelectronics

NasdaqGM:AAOI Ownership Summary, April 5th 2019

What Does The Institutional Ownership Tell Us About Applied Optoelectronics?

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 own 60% of Applied Optoelectronics. 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. 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 Applied Optoelectronics, (below). Of course, keep in mind that there are other factors to consider, too.

NasdaqGM:AAOI Income Statement, April 5th 2019

Investors should note that institutions actually own more than half the company, so they can collectively wield significant power. Applied Optoelectronics is not owned by hedge funds. There are plenty of analysts covering the stock, so it might be worth seeing what they are forecasting, too.

Insider Ownership Of Applied Optoelectronics

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.

Shareholders would probably be interested to learn that insiders own shares in Applied Optoelectronics, Inc.. As individuals, the insiders collectively own US$21m worth of the US$254m company. Some would say this shows alignment of interests between shareholders and the board. But it might be worth checking if those insiders have been selling.

General Public Ownership

The general public holds a 31% stake in AAOI. 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.

Next Steps:

While it is well worth considering the different groups that own a company, there are other factors that are even more important.

Many find it useful to take an in depth look at how a company has performed in the past. You can access this detailed graph of past earnings, revenue and cash flow .

But ultimately it is the future, not the past, that will determine how well the owners of this business will do. Therefore we think it advisable to take a look at this free report showing whether analysts are predicting a brighter 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.