Avalo Therapeutics, Inc.'s (NASDAQ:AVTX) institutional investors lost 11% over the past week but have profited from longer-term gains

Key Insights

• Given the large stake in the stock by institutions, Avalo Therapeutics' stock price might be vulnerable to their trading decisions
• A total of 6 investors have a majority stake in the company with 51% ownership
• Ownership research along with analyst forecasts data help provide a good understanding of opportunities in a stock

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Every investor in Avalo Therapeutics, Inc. (NASDAQ:AVTX) should be aware of the most powerful shareholder groups. And the group that holds the biggest piece of the pie are institutions with 34% ownership. That is, the group stands to benefit the most if the stock rises (or lose the most if there is a downturn).

Institutional investors was the group most impacted after the company's market cap fell to US$140m last week. However, the 17% one-year returns may have helped alleviate their overall losses. We would assume however, that they would be on the lookout for weakness in the future.

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

Check out our latest analysis for Avalo Therapeutics

What Does The Institutional Ownership Tell Us About Avalo Therapeutics?

Institutions typically measure themselves against a benchmark when reporting to their own investors, so they often become more enthusiastic about a stock once it's included in a major index. We would expect most companies to have some institutions on the register, especially if they are growing.

We can see that Avalo Therapeutics 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. 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 Avalo Therapeutics, (below). Of course, keep in mind that there are other factors to consider, too.

It looks like hedge funds own 23% of Avalo Therapeutics shares. That catches my attention because hedge funds sometimes try to influence management, or bring about changes that will create near term value for shareholders. BVF Partners L.P. is currently the company's largest shareholder with 15% of shares outstanding. With 12% and 7.6% of the shares outstanding respectively, OrbiMed Advisors LLC and Nantahala Capital Management, LLC are the second and third largest shareholders.

We did some more digging and found that 6 of the top shareholders account for roughly 51% of the register, implying that along with larger shareholders, there are a few smaller shareholders, thereby balancing out each others interests somewhat.

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 Avalo Therapeutics

The definition of an insider can differ slightly between different countries, but members of the board of directors always count. 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 Avalo Therapeutics, Inc.. In their own names, insiders own US$6.8m worth of stock in the US$140m company. This shows at least some alignment, but we usually like to see larger insider holdings. You can click here to see if those insiders have been buying or selling.

General Public Ownership

With a 19% ownership, the general public, mostly comprising of individual investors, have some degree of sway over Avalo Therapeutics. 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.

Private Equity Ownership

With a stake of 19%, private equity firms could influence the Avalo Therapeutics board. Sometimes we see private equity stick around for the long term, but generally speaking they have a shorter investment horizon and -- as the name suggests -- don't invest in public companies much. After some time they may look to sell and redeploy capital elsewhere.

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. Be aware that Avalo Therapeutics is showing 5 warning signs in our investment analysis , and 3 of those make us uncomfortable...

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.