Institutional investors are NVR, Inc.'s (NYSE:NVR) biggest bettors and were rewarded after last week's US$2.0b market cap gain
Key Insights
Institutions' substantial holdings in NVR implies that they have significant influence over the company's share price
The top 18 shareholders own 50% of the company
Every investor in NVR, Inc. (NYSE:NVR) should be aware of the most powerful shareholder groups. We can see that institutions own the lion's share in the company with 85% ownership. Put another way, the group faces the maximum upside potential (or downside risk).
Last week’s 7.5% gain means that institutional investors were on the positive end of the spectrum even as the company has shown strong longer-term trends. The gains from last week would have further boosted the one-year return to shareholders which currently stand at 53%.
Let's delve deeper into each type of owner of NVR, beginning with the chart below.
See our latest analysis for NVR
What Does The Institutional Ownership Tell Us About NVR?
Many institutions measure their performance against an index that approximates the local market. So they usually pay more attention to companies that are included in major indices.
NVR 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. 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 NVR's historic earnings and revenue below, but keep in mind there's always more to the story.
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 NVR. Our data shows that The Vanguard Group, Inc. is the largest shareholder with 11% of shares outstanding. BlackRock, Inc. is the second largest shareholder owning 9.9% of common stock, and State Street Global Advisors, Inc. holds about 4.7% of the company stock.
A closer look at our ownership figures suggests that the top 18 shareholders have a combined ownership of 50% implying that no single shareholder has a majority.
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 a reasonable number of analysts covering the stock, so it might be useful to find out their aggregate view on the future.
Insider Ownership Of NVR
While the precise definition of an insider can be subjective, almost everyone considers board members to be insiders. Company management run the business, but the CEO will answer to the board, even if he or she is a member of it.
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 NVR, Inc.. Insiders own US$281m worth of shares (at current prices). we sometimes take an interest in whether they have been buying or selling.
General Public Ownership
The general public-- including retail investors -- own 13% stake in the company, and hence can't easily be ignored. This size of ownership, while considerable, may not be enough to change company policy if the decision is not in sync with other large shareholders.
Next Steps:
It's always worth thinking about the different groups who own shares in a company. But to understand NVR better, we need to consider many other factors. For example, we've discovered 2 warning signs for NVR (1 doesn't sit too well with us!) that you should be aware of before investing here.
If you would prefer discover what analysts are predicting in terms of future growth, do not miss this free report on analyst forecasts.
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.