Key Insights

• Given the large stake in the stock by institutions, Semler Scientific's stock price might be vulnerable to their trading decisions
• The top 14 shareholders own 51% of the company
• Insider ownership in Semler Scientific is 18%

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Every investor in Semler Scientific, Inc. (NASDAQ:SMLR) should be aware of the most powerful shareholder groups. The group holding the most number of shares in the company, around 55% to be precise, is institutions. Put another way, the group faces the maximum upside potential (or downside risk).

Because institutional owners have a huge pool of resources and liquidity, their investing decisions tend to carry a great deal of weight, especially with individual investors. Hence, having a considerable amount of institutional money invested in a company is often regarded as a desirable trait.

In the chart below, we zoom in on the different ownership groups of Semler Scientific.

View our latest analysis for Semler Scientific

What Does The Institutional Ownership Tell Us About Semler Scientific?

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.

Semler Scientific 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. 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 Semler Scientific'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. Semler Scientific is not owned by hedge funds. Looking at our data, we can see that the largest shareholder is Hui-Chung Chang with 9.4% of shares outstanding. For context, the second largest shareholder holds about 7.4% of the shares outstanding, followed by an ownership of 5.9% by the third-largest shareholder. Additionally, the company's CEO Douglas Murphy-Chutorian directly holds 1.6% of the total shares outstanding.

A closer look at our ownership figures suggests that the top 14 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. As far as we can tell there isn't analyst coverage of the company, so it is probably flying under the radar.

Insider Ownership Of Semler Scientific

While the precise definition of an insider can be subjective, almost everyone considers board members to be insiders. The company management answer to the board and the latter should represent the interests of shareholders. Notably, sometimes top-level managers are on the board themselves.

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 Semler Scientific, Inc.. It has a market capitalization of just US$325m, and insiders have US$60m worth of shares in their own names. This may suggest that the founders still own a lot of shares. You can click here to see if they have been buying or selling.

General Public Ownership

The general public-- including retail investors -- own 26% 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 2 warning signs for Semler Scientific (1 is significant!) that you should be aware of before investing here.

If you would prefer check out another company -- one with potentially superior financials -- then do not miss this free list of interesting companies, backed by strong financial data.

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.