Key Insights

• Significantly high institutional ownership implies Applied Optoelectronics' stock price is sensitive to their trading actions
• A total of 21 investors have a majority stake in the company with 51% ownership
• Insiders have sold recently

A look at the shareholders of Applied Optoelectronics, Inc. (NASDAQ:AAOI) can tell us which group is most powerful. The group holding the most number of shares in the company, around 68% to be precise, is institutions. Put another way, the group faces the maximum upside potential (or downside risk).

No shareholder likes losing money on their investments, especially institutional investors who saw their holdings drop 4.6% in value last week. However, the 109% one-year return to shareholders might have softened the blow. We would assume however, that they would be on the lookout for weakness in the future.

Let's delve deeper into each type of owner of Applied Optoelectronics, beginning with the chart below.

View our latest analysis for Applied Optoelectronics

What Does The Institutional Ownership Tell Us About Applied Optoelectronics?

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.

We can see that Applied Optoelectronics does have institutional investors; and they hold a good portion of the company's stock. 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 Applied Optoelectronics' 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. Applied Optoelectronics is not owned by hedge funds. The company's largest shareholder is BlackRock, Inc., with ownership of 6.7%. Meanwhile, the second and third largest shareholders, hold 4.9% and 3.5%, of the shares outstanding, respectively. Furthermore, CEO Chih-Hsiang Lin is the owner of 2.1% of the company's shares.

A closer look at our ownership figures suggests that the top 21 shareholders have a combined ownership of 51% implying that no single shareholder has a majority.

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 Applied Optoelectronics

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. 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.

We can see that insiders own shares in Applied Optoelectronics, Inc.. It is a pretty big company, so it is generally a positive to see some potentially meaningful alignment. In this case, they own around US$88m worth of shares (at current prices). If you would like to explore the question of insider alignment, you can click here to see if insiders have been buying or selling.

General Public Ownership

The general public-- including retail investors -- own 27% stake in the company, and hence can't 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.

Next Steps:

While it is well worth considering the different groups that own a company, there are other factors that are even more important. For example, we've discovered 3 warning signs for Applied Optoelectronics (1 is a bit concerning!) that you should be aware of before investing here.

Ultimately the future is most important. You can access this free report on analyst forecasts for the company.

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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.