Key Insights

• Given the large stake in the stock by institutions, Applied Optoelectronics' stock price might be vulnerable to their trading decisions
• The top 21 shareholders own 51% of the company
• Insiders have been selling lately

If you want to know who really controls Applied Optoelectronics, Inc. (NASDAQ:AAOI), then you'll have to look at the makeup of its share registry. We can see that institutions own the lion's share in the company with 68% ownership. In other words, the group stands to gain the most (or lose the most) from their investment into the company.

No shareholder likes losing money on their investments, especially institutional investors who saw their holdings drop 5.3% in value last week. However, the 95% one-year returns may have helped alleviate their overall losses. They should, however, be mindful of further losses in the future.

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

What Does The Institutional Ownership Tell Us About Applied Optoelectronics?

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.

We can see that Applied Optoelectronics does have institutional investors; and they hold a good portion of the company's stock. 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. It is not uncommon to see a big share price drop if two large institutional investors try to sell out of a stock at the same time. So it is worth checking the past earnings trajectory of Applied Optoelectronics, (below). Of course, keep in mind that there are other factors to consider, too.

Institutional investors own over 50% of the company, so together than can probably strongly influence board decisions. We note that hedge funds don't have a meaningful investment in Applied Optoelectronics. The company's largest shareholder is BlackRock, Inc., with ownership of 6.7%. The Vanguard Group, Inc. is the second largest shareholder owning 4.9% of common stock, and Royce & Associates, LP holds about 3.5% of the company stock. Additionally, the company's CEO Chih-Hsiang Lin directly holds 2.1% of the total shares outstanding.

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.

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 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.

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.

Shareholders would probably be interested to learn that insiders own shares in Applied Optoelectronics, Inc.. The insiders have a meaningful stake worth US$100m. Most would see this as a real positive. Most would say this shows alignment of interests between shareholders and the board. Still, it might be worth checking if those insiders have been selling.

General Public Ownership

With a 27% ownership, the general public, mostly comprising of individual investors, have some degree of sway over Applied Optoelectronics. While this group can't necessarily call the shots, it can certainly have a real influence on how the company is run.

Next Steps:

While it is well worth considering the different groups that own a company, there are other factors that are even more important. Case in point: We've spotted 3 warning signs for Applied Optoelectronics you should be aware of, and 1 of them makes us a bit uncomfortable.

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.