Given the large stake in the stock by institutions, NexPoint Diversified Real Estate Trust's stock price might be vulnerable to their trading decisions
A look at the shareholders of NexPoint Diversified Real Estate Trust (NYSE:NXDT) can tell us which group is most powerful. With 56% stake, institutions possess the maximum shares in the company. That is, the group stands to benefit the most if the stock rises (or lose the most if there is a downturn).
Because institutional owners have a huge pool of resources and liquidity, their investing decisions tend to carry a great deal of weight, especially with individual investors. Hence, having a considerable amount of institutional money invested in a company is often regarded as a desirable trait.
In the chart below, we zoom in on the different ownership groups of NexPoint Diversified Real Estate Trust.
What Does The Institutional Ownership Tell Us About NexPoint Diversified Real Estate Trust?
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 NexPoint Diversified Real Estate Trust 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 NexPoint Diversified Real Estate Trust's historic earnings and revenue below, but keep in mind there's always more to the story.
NYSE:NXDT Earnings and Revenue Growth March 30th 2025
Investors should note that institutions actually own more than half the company, so they can collectively wield significant power. We note that hedge funds don't have a meaningful investment in NexPoint Diversified Real Estate Trust. With a 14% stake, CEO James Dondero is the largest shareholder. For context, the second largest shareholder holds about 8.2% of the shares outstanding, followed by an ownership of 6.6% by the third-largest shareholder.
On further inspection, we found that more than half the company's shares are owned by the top 9 shareholders, suggesting that the interests of the larger shareholders are balanced out to an extent by the smaller ones.
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. We're not picking up on any analyst coverage of the stock at the moment, so the company is unlikely to be widely held.
Insider Ownership Of NexPoint Diversified Real Estate Trust
The definition of company insiders can be subjective and does vary between jurisdictions. Our data reflects individual insiders, capturing board members at the very least. Management ultimately answers to the board. However, it is not uncommon for managers to be executive board members, especially if they are a founder or the CEO.
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 information suggests that insiders maintain a significant holding in NexPoint Diversified Real Estate Trust. Insiders own US$24m worth of shares in the US$158m company. It is great to see insiders so invested in the business. It might be worth checking if those insiders have been buying recently.
General Public Ownership
With a 28% ownership, the general public, mostly comprising of individual investors, have some degree of sway over NexPoint Diversified Real Estate Trust. 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:
It's always worth thinking about the different groups who own shares in a company. But to understand NexPoint Diversified Real Estate Trust better, we need to consider many other factors. Case in point: We've spotted 3 warning signs for NexPoint Diversified Real Estate Trust you should be aware of.
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.
