By Andrew Nichols: EnerCom
Traditionally, individuals make their investments by hiring a professional organization to manage their money in the market and make decisions on their behalf. Institutional investing is not the only way to buy into the market though. Recently, there has been an increase in retail investors, who are non-professional investors that buy and sell securities on their own accord. This is facilitated by the rising popularity of investing apps such as Robinhood, Acorns, and Sofi where individuals can quickly and easily sign up and begin trading. Retail investors, collectively, are powerful and can have a large effect on the market. For example, the massive stock price jumps of GameStop (GME) and AMC Entertainment (AMC) earlier this year.
This begs the question, have retail investors bought into the energy industry? If so, how many shares do they own? We researched the percent of shares outstanding owned by institutional investors for top energy companies and found that over the past two years the percentage held by institutional investors decreased from 95% in 2019 to 80% today. This shift can mean many things for the energy sector in the future. Companies may need to shift their investor relations tactics to appeal to a wider audience so these non-professional retail investors can learn more about their companies. Also, retail investors tend to bring volatility to the market since many of them are day traders who buy and sell stocks often so companies may need to think about incentives like dividends to motivate shareholders to hold longer.
Another important factor to look at is how the energy sector has performed this year to date. The energy sector is the best performing sector, so it is odd that institutional investors are leaving the space. It will be interesting to see how long these large investors stay out of the energy sector and if the trend we are seeing will continue or reverse.
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