A look at the shareholders of Diamond Offshore Drilling, Inc. (NYSE:DO) can tell us which group is most powerful. The group holding the most number of shares in the company, around 78% to be precise, is institutions. Put another way, the group faces the maximum upside potential (or downside risk).
Unfortunately, institutional ended up on the other end of the spectrum as market cap fell by US$107m.
In the chart below, we zoom in on the different ownership groups of Diamond Offshore Drilling.
What Does The Institutional Ownership Tell Us About Diamond Offshore Drilling?
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 Diamond Offshore Drilling. 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 Diamond Offshore Drilling's 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. It looks like hedge funds own 7.5% of Diamond Offshore Drilling shares. 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. Contrarius Investment Management Limited is currently the largest shareholder, with 8.8% of shares outstanding. In comparison, the second and third largest shareholders hold about 7.8% and 7.7% of the stock. In addition, we found that Bernie Wolford, the CEO has 0.5% of the shares allocated to their name.
We did some more digging and found that 7 of the top shareholders account for roughly 51% 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. There are plenty of analysts covering the stock, so it might be worth seeing what they are forecasting, too.
Insider Ownership Of Diamond Offshore Drilling
The definition of an insider can differ slightly between different countries, but members of the board of directors always count. 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.
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.
Our information suggests that Diamond Offshore Drilling, Inc. insiders own under 1% of the company. It appears that the board holds about US$5.1m worth of stock. This compares to a market capitalization of US$888m. We generally like to see a board more invested. However it might be worth checking if those insiders have been buying.
General Public Ownership
With a 14% ownership, the general public, mostly comprising of individual investors, have some degree of sway over Diamond Offshore Drilling. 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.
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.
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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.
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