NovoCure Limited (NASDAQ:NVCR) institutional owners may be pleased with recent gains after 85% loss over the past year
Key Insights
Given the large stake in the stock by institutions, NovoCure's stock price might be vulnerable to their trading decisions
A total of 5 investors have a majority stake in the company with 57% ownership
A look at the shareholders of NovoCure Limited (NASDAQ:NVCR) can tell us which group is most powerful. With 79% stake, institutions possess the maximum shares in the company. In other words, the group stands to gain the most (or lose the most) from their investment into the company.
Last week's US$128m market cap gain would probably be appreciated by institutional investors, especially after a year of 85% losses.
Let's take a closer look to see what the different types of shareholders can tell us about NovoCure.
See our latest analysis for NovoCure
What Does The Institutional Ownership Tell Us About NovoCure?
Institutional investors commonly compare their own returns to the returns of a commonly followed index. So they generally do consider buying larger companies that are included in the relevant benchmark index.
NovoCure already has institutions on the share registry. Indeed, they own a respectable stake in 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 NovoCure's historic earnings and revenue below, but keep in mind there's always more to the story.
Investors should note that institutions actually own more than half the company, so they can collectively wield significant power. NovoCure is not owned by hedge funds. Looking at our data, we can see that the largest shareholder is Capital Research and Management Company with 17% of shares outstanding. For context, the second largest shareholder holds about 15% of the shares outstanding, followed by an ownership of 9.2% by the third-largest shareholder.
Our research also brought to light the fact that roughly 57% of the company is controlled by the top 5 shareholders suggesting that these owners wield significant influence on the business.
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 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 NovoCure
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.
Most consider insider ownership a positive because it can indicate the board is well aligned with other shareholders. However, on some occasions too much power is concentrated within this group.
Our information suggests that insiders maintain a significant holding in NovoCure Limited. It has a market capitalization of just US$1.4b, and insiders have US$143m worth of shares in their own names. That's quite significant. Most would be pleased to see the board is investing alongside them. You may wish to access this free chart showing recent trading by insiders.
General Public Ownership
The general public-- including retail investors -- own 11% stake in the company, and hence can't easily be ignored. While this group can't necessarily call the shots, it can certainly have a real influence on how the company is run.
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. Like risks, for instance. Every company has them, and we've spotted 3 warning signs for NovoCure (of which 1 makes us a bit uncomfortable!) you should know about.
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.
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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.
