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In the wake of QUALCOMM Incorporated's (NASDAQ:QCOM) latest US$4.4b market cap drop, institutional owners may be forced to take severe actions

Key Insights

  • Significantly high institutional ownership implies QUALCOMM's stock price is sensitive to their trading actions

  • 44% of the business is held by the top 25 shareholders

  • Analyst forecasts along with ownership data serve to give a strong idea about prospects for a business

If you want to know who really controls QUALCOMM Incorporated (NASDAQ:QCOM), 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 75% to be precise, is institutions. Put another way, the group faces the maximum upside potential (or downside risk).

And so it follows that institutional investors was the group most impacted after the company's market cap fell to US$115b last week after a 3.7% drop in the share price. The recent loss, which adds to a one-year loss of 22% for stockholders, may not sit well with this group of investors. Also referred to as "smart money", institutions have a lot of sway over how a stock's price moves. Hence, if weakness in QUALCOMM's share price continues, institutional investors may feel compelled to sell the stock, which might not be ideal for individual investors.

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

Check out our latest analysis for QUALCOMM

ownership-breakdown
ownership-breakdown

What Does The Institutional Ownership Tell Us About QUALCOMM?

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.

QUALCOMM already has institutions on the share registry. Indeed, they own a respectable stake in the company. 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 QUALCOMM, (below). Of course, keep in mind that there are other factors to consider, too.

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

Investors should note that institutions actually own more than half the company, so they can collectively wield significant power. We note that hedge funds don't have a meaningful investment in QUALCOMM. The Vanguard Group, Inc. is currently the largest shareholder, with 9.9% of shares outstanding. With 7.5% and 4.4% of the shares outstanding respectively, BlackRock, Inc. and State Street Global Advisors, Inc. are the second and third largest shareholders.

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.

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 are plenty of analysts covering the stock, so it might be worth seeing what they are forecasting, too.

Insider Ownership Of QUALCOMM

The definition of an insider can differ slightly between different countries, but members of the board of directors always count. 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 information suggests that QUALCOMM Incorporated insiders own under 1% of the company. Being so large, we would not expect insiders to own a large proportion of the stock. Collectively, they own US$139m of stock. 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

The general public, who are usually individual investors, hold a 25% stake in QUALCOMM. 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 QUALCOMM is showing 1 warning sign in our investment analysis , you should know about...

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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