Key Insights

• Significantly high institutional ownership implies ARMOUR Residential REIT's stock price is sensitive to their trading actions
• The top 25 shareholders own 47% of the company
• Recent purchases by insiders

To get a sense of who is truly in control of ARMOUR Residential REIT, Inc. (NYSE:ARR), it is important to understand the ownership structure of the business. We can see that institutions own the lion's share in the company with 52% ownership. Put another way, the group faces the maximum upside potential (or downside risk).

After a year of 6.0% losses, last week's 5.6% gain would be welcomed by institutional investors as a possible sign that returns might start trending higher.

In the chart below, we zoom in on the different ownership groups of ARMOUR Residential REIT.

What Does The Institutional Ownership Tell Us About ARMOUR Residential REIT?

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.

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

Investors should note that institutions actually own more than half the company, so they can collectively wield significant power. Hedge funds don't have many shares in ARMOUR Residential REIT. The company's largest shareholder is BlackRock, Inc., with ownership of 18%. Meanwhile, the second and third largest shareholders, hold 11% and 3.7%, of the shares outstanding, respectively.

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.

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 ARMOUR Residential REIT

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 information suggests that ARMOUR Residential REIT, Inc. insiders own under 1% of the company. It appears that the board holds about US$5.2m worth of stock. This compares to a market capitalization of US$943m. Many investors in smaller companies prefer to see the board more heavily invested. You can click here to see if those insiders have been buying or selling.

General Public Ownership

The general public-- including retail investors -- own 47% 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:

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. For instance, we've identified 2 warning signs for ARMOUR Residential REIT that you should be aware of.

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.