MGE Energy, Inc.'s (NASDAQ:MGEE) one-year returns climbed after last week's 4.3% gain, institutional investors must be happy
Key Insights
Institutions' substantial holdings in MGE Energy implies that they have significant influence over the company's share price
The top 25 shareholders own 49% of the company
Every investor in MGE Energy, Inc. (NASDAQ:MGEE) should be aware of the most powerful shareholder groups. We can see that institutions own the lion's share in the company with 54% ownership. Put another way, the group faces the maximum upside potential (or downside risk).
Last week’s 4.3% 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 6.1% and last week's gain would have been more than welcomed.
In the chart below, we zoom in on the different ownership groups of MGE Energy.
See our latest analysis for MGE Energy
What Does The Institutional Ownership Tell Us About MGE Energy?
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.
MGE Energy already has institutions on the share registry. Indeed, they own a respectable stake in the company. This implies the analysts working for those institutions have looked at the stock and they like it. But just like anyone else, they could be wrong. 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 MGE Energy, (below). Of course, keep in mind that there are other factors to consider, too.
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 MGE Energy. Our data shows that The Vanguard Group, Inc. is the largest shareholder with 12% of shares outstanding. For context, the second largest shareholder holds about 7.9% of the shares outstanding, followed by an ownership of 7.1% by the third-largest shareholder.
Our studies suggest that the top 25 shareholders collectively control less than half of the company's shares, meaning that the company's shares are widely disseminated and there is no dominant shareholder.
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. There is a little analyst coverage of the stock, but not much. So there is room for it to gain more coverage.
Insider Ownership Of MGE Energy
The definition of an insider can differ slightly between different countries, but members of the board of directors always count. Company management run the business, but the CEO will answer to the board, even if he or she is a member of it.
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 MGE Energy, Inc. in their own names. Keep in mind that it's a big company, and the insiders own US$4.2m worth of shares. The absolute value might be more important than the proportional share. It is always good to see at least some insider ownership, but it might be worth checking if those insiders have been selling.
General Public Ownership
The general public, who are usually individual investors, hold a 46% stake in MGE Energy. 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:
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 MGE Energy is showing 2 warning signs in our investment analysis , you should know about...
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.
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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.
