Key Insights

• Significantly high institutional ownership implies Cadence Design Systems' stock price is sensitive to their trading actions
• The top 25 shareholders own 50% of the company
• Ownership research along with analyst forecasts data help provide a good understanding of opportunities in a stock

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Every investor in Cadence Design Systems, Inc. (NASDAQ:CDNS) 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. That is, the group stands to benefit the most if the stock rises (or lose the most if there is a downturn).

And as as result, institutional investors reaped the most rewards after the company's stock price gained 14% last week. The gains from last week would have further boosted the one-year return to shareholders which currently stand at 1.2%.

In the chart below, we zoom in on the different ownership groups of Cadence Design Systems.

See our latest analysis for Cadence Design Systems

What Does The Institutional Ownership Tell Us About Cadence Design Systems?

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 Cadence Design Systems 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. If multiple institutions change their view on a stock at the same time, you could see the share price drop fast. It's therefore worth looking at Cadence Design Systems' earnings history below. Of course, the future is what really matters.

Since institutional investors own more than half the issued stock, the board will likely have to pay attention to their preferences. We note that hedge funds don't have a meaningful investment in Cadence Design Systems. Our data shows that The Vanguard Group, Inc. is the largest shareholder with 9.4% of shares outstanding. BlackRock, Inc. is the second largest shareholder owning 7.9% of common stock, and State Street Global Advisors, Inc. holds about 4.4% of the company stock.

A deeper look at our ownership data shows that the top 25 shareholders collectively hold less than half of the register, suggesting a large group of small holders where 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 Cadence Design Systems

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.

I generally consider insider ownership to be a good thing. However, on some occasions it makes it more difficult for other shareholders to hold the board accountable for decisions.

Our most recent data indicates that insiders own less than 1% of Cadence Design Systems, Inc.. It is a very large company, so it would be surprising to see insiders own a large proportion of the company. Though their holding amounts to less than 1%, we can see that board members collectively own US$221m worth of shares (at current prices). It is always good to see at least some insider ownership, but it might be worth checking if those insiders have been selling.

General Public Ownership

The general public, who are usually individual investors, hold a 15% stake in Cadence Design Systems. While this group can't necessarily call the shots, it can certainly have a real influence on how the company is run.

Next Steps:

It's always worth thinking about the different groups who own shares in a company. But to understand Cadence Design Systems better, we need to consider many other factors.

I always like to check for a history of revenue growth. You can too, by accessing this free chart of historic revenue and earnings in this detailed graph.

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.