Significantly high institutional ownership implies Frequency Electronics' stock price is sensitive to their trading actions
54% of the business is held by the top 7 shareholders
Using data from company's past performance alongside ownership research, one can better assess the future performance of a company
If you want to know who really controls Frequency Electronics, Inc. (NASDAQ:FEIM), then you'll have to look at the makeup of its share registry. And the group that holds the biggest piece of the pie are institutions with 38% ownership. In other words, the group stands to gain the most (or lose the most) from their investment into the company.
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 Frequency Electronics.
NasdaqGM:FEIM Ownership Breakdown January 4th 2024
What Does The Institutional Ownership Tell Us About Frequency Electronics?
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 Frequency Electronics. This can indicate that the company has a certain degree of credibility in the investment community. However, it is best to be wary of relying on the supposed validation that comes with institutional investors. They too, get it wrong sometimes. 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 Frequency Electronics' historic earnings and revenue below, but keep in mind there's always more to the story.
NasdaqGM:FEIM Earnings and Revenue Growth January 4th 2024
Our data indicates that hedge funds own 20% of Frequency Electronics. That's interesting, because hedge funds can be quite active and activist. Many look for medium term catalysts that will drive the share price higher. Edenbrook Capital, Llc is currently the largest shareholder, with 20% of shares outstanding. With 7.2% and 6.9% of the shares outstanding respectively, Dimensional Fund Advisors LP and Wax Asset Management, LLC are the second and third largest shareholders.
We did some more digging and found that 7 of the top shareholders account for roughly 54% of the register, implying that along with larger shareholders, there are a few smaller shareholders, thereby balancing out each others interests somewhat.
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. 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 Frequency Electronics
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.
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.
Our most recent data indicates that insiders own some shares in Frequency Electronics, Inc.. As individuals, the insiders collectively own US$5.6m worth of the US$98m company. Some would say this shows alignment of interests between shareholders and the board, though we generally prefer to see bigger insider holdings. But it might be worth checking if those insiders have been selling.
General Public Ownership
The general public, who are usually individual investors, hold a 31% stake in Frequency Electronics. 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 Frequency Electronics better, we need to consider many other factors.
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.
