Key Insights

• Institutions' substantial holdings in KLA implies that they have significant influence over the company's share price
• 50% of the business is held by the top 20 shareholders
• Ownership research along with analyst forecasts data help provide a good understanding of opportunities in a stock

To get a sense of who is truly in control of KLA Corporation (NASDAQ:KLAC), it is important to understand the ownership structure of the business. The group holding the most number of shares in the company, around 88% to be precise, is institutions. Put another way, the group faces the maximum upside potential (or downside risk).

Losing money on investments is something no shareholder enjoys, least of all institutional investors who saw their holdings value drop by 3.8% last week. Still, the 8.1% one-year gains may have helped mitigate their overall losses. They should, however, be mindful of further losses in the future.

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

See our latest analysis for KLA

What Does The Institutional Ownership Tell Us About KLA?

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.

We can see that KLA does have institutional investors; and they hold a good portion of the company's stock. 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 KLA's historic earnings and revenue below, but keep in mind there's always more to the story.

Since institutional investors own more than half the issued stock, the board will likely have to pay attention to their preferences. KLA is not owned by hedge funds. The Vanguard Group, Inc. is currently the largest shareholder, with 10% of shares outstanding. With 8.7% and 4.5% of the shares outstanding respectively, BlackRock, Inc. and State Street Global Advisors, Inc. are the second and third largest shareholders.

A closer look at our ownership figures suggests that the top 20 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 KLA

While the precise definition of an insider can be subjective, almost everyone considers board members to be insiders. 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.

Our most recent data indicates that insiders own less than 1% of KLA Corporation. 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$97m worth of shares. In this sort of situation, it can be more interesting to see if those insiders have been buying or selling.

General Public Ownership

The general public, who are usually individual investors, hold a 12% stake in KLA. 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. Take risks for example - KLA has 1 warning sign we think you should be aware of.

But ultimately it is the future, not the past, that will determine how well the owners of this business will do. Therefore we think it advisable to take a look at this free report showing whether analysts are predicting a brighter future.

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.