Key Insights

• Significantly high institutional ownership implies Cerence's stock price is sensitive to their trading actions
• The top 13 shareholders own 51% of the company
• Recent sales by insiders

Every investor in Cerence Inc. (NASDAQ:CRNC) should be aware of the most powerful shareholder groups. The group holding the most number of shares in the company, around 84% to be precise, is institutions. Put another way, the group faces the maximum upside potential (or downside risk).

After a year of 78% losses, last week’s 10% gain would be welcomed by institutional investors as a possible sign that returns might start trending higher.

Let's take a closer look to see what the different types of shareholders can tell us about Cerence.

Check out our latest analysis for Cerence

What Does The Institutional Ownership Tell Us About Cerence?

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.

Cerence already has institutions on the share registry. Indeed, they own a respectable stake in the company. 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. If multiple institutions change their view on a stock at the same time, you could see the share price drop fast. It's therefore worth looking at Cerence's earnings history below. Of course, the future is what really matters.

Since institutional investors own more than half the issued stock, the board will likely have to pay attention to their preferences. Cerence is not owned by hedge funds. Looking at our data, we can see that the largest shareholder is American Capital Management, Inc. with 9.3% of shares outstanding. BlackRock, Inc. is the second largest shareholder owning 7.9% of common stock, and The Vanguard Group, Inc. holds about 7.4% of the company stock.

A closer look at our ownership figures suggests that the top 13 shareholders have a combined ownership of 51% implying that no single shareholder has a majority.

Researching institutional ownership is a good way to gauge and filter a stock's expected performance. The same can be achieved by studying analyst sentiments. 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 Cerence

While the precise definition of an insider can be subjective, almost everyone considers board members to be insiders. 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.

We can report that insiders do own shares in Cerence Inc.. It has a market capitalization of just US$135m, and insiders have US$5.1m worth of shares, in their own names. This shows at least some alignment, but we usually like to see larger insider holdings. You can click here to see if those insiders have been buying or selling.

General Public Ownership

With a 12% ownership, the general public, mostly comprising of individual investors, have some degree of sway over Cerence. 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:

While it is well worth considering the different groups that own a company, there are other factors that are even more important. To that end, you should learn about the 3 warning signs we've spotted with Cerence (including 1 which is concerning) .

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.