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A fantastic week for Lam Research Corporation's (NASDAQ:LRCX) 86% institutional owners, one-year returns continue to impress

Key Insights

  • Institutions' substantial holdings in Lam Research implies that they have significant influence over the company's share price

  • 50% of the business is held by the top 22 shareholders

  • Ownership research along with analyst forecasts data help provide a good understanding of opportunities in a stock

Every investor in Lam Research Corporation (NASDAQ:LRCX) should be aware of the most powerful shareholder groups. We can see that institutions own the lion's share in the company with 86% ownership. That is, the group stands to benefit the most if the stock rises (or lose the most if there is a downturn).

Last week’s 4.4% 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 9.1% and last week’s gain was the icing on the cake.

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

See our latest analysis for Lam Research

ownership-breakdown
ownership-breakdown

What Does The Institutional Ownership Tell Us About Lam Research?

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.

As you can see, institutional investors have a fair amount of stake in Lam Research. 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. 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 Lam Research's historic earnings and revenue below, but keep in mind there's always more to the story.

earnings-and-revenue-growth
earnings-and-revenue-growth

Institutional investors own over 50% of the company, so together than can probably strongly influence board decisions. Hedge funds don't have many shares in Lam Research. Our data shows that The Vanguard Group, Inc. is the largest shareholder with 8.8% of shares outstanding. Meanwhile, the second and third largest shareholders, hold 8.2% and 4.2%, of the shares outstanding, respectively.

A closer look at our ownership figures suggests that the top 22 shareholders have a combined ownership of 50% 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. Quite a few analysts cover the stock, so you could look into forecast growth quite easily.

Insider Ownership Of Lam Research

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.

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 data suggests that insiders own under 1% of Lam Research Corporation in their own names. As it is a large company, we'd only expect insiders to own a small percentage of it. But it's worth noting that they own US$236m worth of shares. 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 14% ownership, the general public, mostly comprising of individual investors, have some degree of sway over Lam Research. While this group can't necessarily call the shots, it can certainly have a real influence on how the company is run.

Next Steps:

I find it very interesting to look at who exactly owns a company. But to truly gain insight, we need to consider other information, too.

I like to dive deeper into how a company has performed in the past. You can find historic revenue and earnings in this detailed graph.

Ultimately the future is most important. You can access this free report on analyst forecasts for the company.

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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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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