Key Insights

• Institutions' substantial holdings in American Outdoor Brands implies that they have significant influence over the company's share price
• 52% of the business is held by the top 11 shareholders
• Ownership research, combined with past performance data can help provide a good understanding of opportunities in a stock

Every investor in American Outdoor Brands, Inc. (NASDAQ:AOUT) should be aware of the most powerful shareholder groups. And the group that holds the biggest piece of the pie are institutions with 57% ownership. Put another way, the group faces the maximum upside potential (or downside risk).

Last week's 45% gain means that institutional investors were on the positive end of the spectrum even as the company has shown strong longer-term trends. One-year return to shareholders is currently 94% and last week's gain was the icing on the cake.

Let's take a closer look to see what the different types of shareholders can tell us about American Outdoor Brands.

What Does The Institutional Ownership Tell Us About American Outdoor Brands?

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 American Outdoor Brands 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. 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 American Outdoor Brands' 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. Our data indicates that hedge funds own 11% of American Outdoor Brands. 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. The company's largest shareholder is Hallador Investment Advisors, Inc., with ownership of 8.7%. With 6.5% and 6.4% of the shares outstanding respectively, Dimensional Fund Advisors LP and Brandes Investment Partners, LP are the second and third largest shareholders. Additionally, the company's CEO Brian Murphy directly holds 0.9% of the total shares outstanding.

Looking at the shareholder registry, we can see that 52% of the ownership is controlled by the top 11 shareholders, meaning that no single shareholder has a majority interest in the ownership.

While it makes sense to study institutional ownership data for a company, it also makes sense to study analyst sentiments to know which way the wind is blowing. There is some analyst coverage of the stock, but it could still become more well known, with time.

Insider Ownership Of American Outdoor Brands

While the precise definition of an insider can be subjective, almost everyone considers board members to be insiders. Management ultimately answers to the board. However, it is not uncommon for managers to be executive board members, especially if they are a founder or the CEO.

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.

Shareholders would probably be interested to learn that insiders own shares in American Outdoor Brands, Inc.. In their own names, insiders own US$7.9m worth of stock in the US$170m 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-- including retail investors -- own 28% 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. Be aware that American Outdoor Brands is showing 1 warning sign in our investment analysis , you should know about...

But ultimately it is the future, not the past, that will determine how well the owners of this business will do. Therefore we think it advisable to take a look at this free report showing whether analysts are predicting a brighter 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.