Yahoo Finance Cisco Systems, Inc.'s (NASDAQ:CSCO) latest 3.1% decline adds to one-year losses, institutional investors may consider drastic measures
If you want to know who really controls Cisco Systems, Inc. (NASDAQ:CSCO), then you'll have to look at the makeup of its share registry. The group holding the most number of shares in the company, around 74% to be precise, is institutions. Put another way, the group faces the maximum upside potential (or downside risk).
And institutional investors saw their holdings value drop by 3.1% last week. Needless to say, the recent loss which further adds to the one-year loss to shareholders of 13% might not go down well especially with this category of shareholders. Also referred to as "smart money", institutions have a lot of sway over how a stock's price moves. As a result, if the decline continues, institutional investors may be pressured to sell Cisco Systems which might hurt individual investors.
In the chart below, we zoom in on the different ownership groups of Cisco Systems.
See our latest analysis for Cisco Systems
What Does The Institutional Ownership Tell Us About Cisco Systems?
Many institutions measure their performance against an index that approximates the local market. So they usually pay more attention to companies that are included in major indices.
As you can see, institutional investors have a fair amount of stake in Cisco Systems. 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 Cisco Systems' 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. Cisco Systems is not owned by hedge funds. The Vanguard Group, Inc. is currently the company's largest shareholder with 9.2% of shares outstanding. In comparison, the second and third largest shareholders hold about 8.4% and 4.4% of the stock.
On studying our ownership data, we found that 25 of the top shareholders collectively own less than 50% of the share register, implying that no single individual has a majority interest.
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. Quite a few analysts cover the stock, so you could look into forecast growth quite easily.
Insider Ownership Of Cisco Systems
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.
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 Cisco Systems, Inc. insiders own under 1% of the company. It is a very large company, so it would be surprising to see insiders own a large proportion of the company. Though their holding amounts to less than 1%, we can see that board members collectively own US$50m worth of shares (at current prices). It is always good to see at least some insider ownership, but it might be worth checking if those insiders have been selling.
General Public Ownership
With a 26% ownership, the general public, mostly comprising of individual investors, have some degree of sway over Cisco Systems. 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:
It's always worth thinking about the different groups who own shares in a company. But to understand Cisco Systems better, we need to consider many other factors.
I always like to check for a history of revenue growth. You can too, by accessing this free chart of historic revenue and earnings in this detailed graph.
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.
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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.
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