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Every investor in Alector, Inc. (NASDAQ:ALEC) should be aware of the most powerful shareholder groups. Generally speaking, as a company grows, institutions will increase their ownership. Conversely, insiders often decrease their ownership over time. I quite like to see at least a little bit of insider ownership. As Charlie Munger said 'Show me the incentive and I will show you the outcome.'
Alector has a market capitalization of US$1.3b, so we would expect some institutional investors to have noticed the stock. In the chart below below, we can see that institutions are noticeable on the share registry. Let's delve deeper into each type of owner, to discover more about ALEC.
What Does The Institutional Ownership Tell Us About Alector?
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.
Alector already has institutions on the share registry. Indeed, they own 6.4% of 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. 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 Alector's historic earnings and revenue, below, but keep in mind there's always more to the story.
We note that hedge funds don't have a meaningful investment in Alector. There is some analyst coverage of the stock, but it could still become more well known, with time.
Insider Ownership Of Alector
While the precise definition of an insider can be subjective, almost everyone considers board members to be insiders. Company management run the business, but the CEO will answer to the board, even if he or she is a member of it.
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.
Our most recent data indicates that insiders own a reasonable proportion of Alector, Inc.. Insiders own US$194m worth of shares in the US$1.3b company. That's quite meaningful. 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, with a 36% stake in the company, will not easily be ignored. 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 Equity Ownership
Private equity firms hold a 43% stake in ALEC. This suggests they can be influential in key policy decisions. Some investors might be encouraged by this, since private equity are sometimes able to encourage strategies that help the market see the value in the company. Alternatively, those holders might be exiting the investment after taking it public.
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 .
If you would prefer discover what analysts are predicting in terms of future growth, do not miss this free report on analyst forecasts.
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 firstname.lastname@example.org. 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.