Is Now The Time To Put Microsoft (NASDAQ:MSFT) On Your Watchlist? – Simply Wall St News


The big shareholder groups in Microsoft Corporation (NASDAQ:MSFT) have power over the company. Generally speaking, as a company grows, institutions will increase their ownership. Conversely, insiders often decrease their ownership over time. Companies that have been privatized tend to have low insider ownership.

With a market capitalization of US$1.1t, Microsoft is rather large. We’d expect to see institutional investors on the register. Companies of this size are usually well known to retail investors, too. Taking a look at our data on the ownership groups (below), it’s seems that institutional investors have bought into the company. We can zoom in on the different ownership groups, to learn more about MSFT.

See our latest analysis for Microsoft

NasdaqGS:MSFT Ownership Summary, November 1st 2019

What Does The Institutional Ownership Tell Us About Microsoft?

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 Microsoft does have institutional investors; and they hold 74% of the stock. 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 Microsoft’s historic earnings and revenue, below, but keep in mind there’s always more to the story.

NasdaqGS:MSFT Income Statement, November 1st 2019
NasdaqGS:MSFT Income Statement, November 1st 2019

Institutional investors own over 50% of the company, so together than can probably strongly influence board decisions. Microsoft is not owned by hedge funds. Quite a few analysts cover the stock, so you could look into forecast growth quite easily.

Insider Ownership Of Microsoft

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. The company management answer to the board; and the latter should represent the interests of shareholders. Notably, sometimes top-level managers are on the board, themselves.

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 Microsoft Corporation. It is a very large company, and board members collectively own US$15b worth of shares (at current prices). I sometimes take an interest in whether they have been buying or selling.

General Public Ownership

The general public, with a 24% stake in the company, will not easily be ignored. 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.

I like to dive deeper into how a company has performed in the past. You can access this interactive graph of past earnings, revenue and cash flow, for free.

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.

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned. Thank you for reading.

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