Taking a Break from My Normal Routine of Sharing Unsolicited Opinions
Decided to do a fun thing today. I was looking at the Tesla ticker in my TD Ameritrade brokerage account, and I noticed something interesting. The percent owned by institutional investors is 39.77%, which felt kind of low.
Thought I’d put that theory to the test. So what I did was gather a list of the largest 50 companies in the world by market capitalization. I found out how much each is owned by institutional investors. Then, I compared them to Tesla.
You may be wondering, “what is an institutional investor?” They are, according to Investopedia:
“A company or organization that invests money on behalf of other people. Mutual funds, pensions, and insurance companies are examples. Institutional investors often buy and sell substantial blocks of stocks, bonds, or other securities and, for that reason, are considered to be the whales on Wall Street. The group is also viewed as more sophisticated than the average retail investor and, in some instances, are subject to less restrictive regulations.”
If you’d like examples of retail vs an institutional investors, retail investors are people like the average person/Robinhood trader. Institutional investors, on the other hand, are Vanguard, Blackrock etc.
44 of the companies on the list are American. 2 are Chinese, 1 is Taiwanese, 1 is Japanese, 1 is Dutch, and 1 is Swiss. Out of the American companies, Visa has the highest percentage of itself owned by institutional investors at 92.76%.
Tesla is #42 out of the 44 American companies. The only companies with a lower percentage are Wal-Mart at 28.85%, and Berkshire Hathaway (class A shares) at 17.52%.
Of the international companies, only Alibaba has a higher percentage of itself owned by institutional investors at 41.59%. The lowest is Toyota Motors, which has only 1.11% of itself owned by institutional investors.
What’s it All Mean?
I don’t really know. Like I said, thought it would be fun to find out, and hoping someone else might find it interesting.
I did find the contrast between how much American companies are typically owned by institutional investors and international companies interesting. Could be it’s too small of a sample size to say anything. Could be it’s indicative of a greater trend. If so, then perhaps there’s something uniquely cultural or political about institutional ownership of equities in the United States. Could also be TD only counts the percent of those companies owned by American institutional investors. Toyota’s seemed strikingly low.
Maybe it means institutional investors don’t have enough faith in the stock to hold a long position. My Tesla bearish bias could be telling me that. Alternatively, they could just be afraid of its volatility.
Tesla was recently added to the S&P 500. Therefore more institutional investors must own the stock, so their indices can reflect the S&P 500. It follows the percentage of Tesla owned by Institutional Investors has grown in the time since. I can’t say how much, TD Ameritrade doesn’t seem to offer backwards looking info like that. But if I do find out somehow, I’ll amend this. Perhaps they haven’t finished buying Tesla shares, in which case Tesla ownership by institutional investors should grow, though I can’t see why it would take this long.
It’s also been speculated that benchmark funds did not buy at the same time as tracking funds. Another reason perhaps to expect this percentage to climb.
In any event, here’s the Google Sheet I put all of this information into if there are any data nerds who want to look for themselves. Since everyone loves data, I’ll do more of these with more interesting data points in the future.