Who Owns Sony?

Sony Group (NYSE:SONY), for many years best known as a consumer electronics brand, is today a major music, film and entertainment company.

Sony is among Japan’s most well-known public businesses, making it a relatively popular stock among American retail investors but who owns Sony?

Sony’s Biggest Institutional Owners

The single largest investor in Sony is Primecap Management Company. With over 22 million shares, Primecap owns more of Sony than the next three largest investors combined. As of the time of this writing, Primecap’s Sony stake is valued at about $1.94 billion.

The next-largest shareholder of Sony is Aristotle Capital Management. This fund holds 12.8 million shares valued at $1.08 billion. Rounding out the top three is Fisher Asset Management, which holds a 5.6 million share stake valued at $475 million.

Further down the list of Sony’s institutional investors, much more recognizable names begin to appear. Blackrock, for example, owns 3.5 million shares, while Bank of America owns 4.4 million. Because Sony is based in Japan rather than America, large American index fund operators like Vanguard are not major shareholders in the company.

Who Really Owns Most of Sony?

While the aforementioned institutional investors control the largest stakes in the company, it’s worth noting that institutional ownership of Sony accounts for just 8 percent of the company’s total stock.

Sony also doesn’t have any appreciable level of insider ownership, an unusual feature for a company so large and well-established.

This leaves retail investors in control of more than 90 percent of the company’s outstanding shares. This is fairly unusual, as institutional investors typically account for 70 percent or more of stock ownership.

In Sony’s case, however, retail investor interest in the stock has strongly outpaced that of major institutions. It should be noted that this applies both to ownership and short positions, as just 0.1 percent of Sony’s float has been sold short by institutional investors.

Why Is Institutional Ownership in Sony So Low?

Despite being a well-recognized electronics and entertainment brand, there are multiple reasons it has largely been overlooked by institutional investors.

To begin with, Japanese companies as a whole have been unpopular with American institutional investors for many years due to the weak growth of the Japanese economy. For reference, even Toyota’s institutional ownership is under 1.5 percent.

This trend has, however, begun to turn around recently. A resurgence of the Japanese economy has driven renewed interest in the country’s businesses from American investors. Most prominently, Warren Buffett’s Berkshire Hathaway has been taken a pronounced stake in Japanese stocks.

Sony also has limited growth prospects that may make it a weak candidate as an investment. Over the next five years, Sony’s earnings are expected to grow at a compounded annual rate of just 4.3 percent.

Institutional investors may believe that Sony is overpriced. At 3.5 times projected earnings growth, though, Sony shares don’t trade at a particularly lofty premium.

Finally, Sony faces stiff competition in many of its key business segments. In music production, for example, Sony must compete with the much larger Universal Music Group.

Sony’s entertainment and media business, likewise, finds itself up against the likes of Disney, Netflix and Paramount. Because of the need to compete with larger, more dominant companies, institutional investors may believe that Sony lacks a viable moat.

The Bull Case for Sony

Despite these potential headwinds, it’s clear that institutional investors like Primecap and Aristotle also have solid cases for investing in Sony.

One of the most apparent is its healthy pace of revenue growth. In the most recent quarter, the company reported $21.64 billion in revenue, up 21.6 percent from a year earlier.

Sony also maintains a respectable level of profitability. Over the trailing 12-month period, the company’s net margin has been 8.1 percent. Its return on equity, meanwhile, has been 13.4 percent. While far from enormous, these margins offer Sony a decent chance of producing reliable, steady profits for the foreseeable future.

Sony also has a relatively straightforward long-term growth strategy that focuses on maximizing value across its core business lines.

In the music segment, for example, the company plans to continue adding artists to its wholly-owned labels while also exploring social media platforms as new sources of revenue.

In its entertainment business, Sony is choosing to bypass the costs associated with creating its own distribution network and instead focusing on creative investment.

Despite the market pricing it at a high multiple to its forecasted growth, several of Sony’s other valuation metrics indicate that it could be fairly valued.

To begin with, the stock trades at just 6.9 times cash flow and 14.9 times forward earnings. Sony also has a relatively modest price-to-sales ratio of 1.21. This value argument is strengthened by Sony’s relatively low debt load, as the company’s debt-to-equity ratio is just 0.26.

Finally, Japan’s improving economic outlook could help to bolster Sony’s growth. Recently rising to 6 percent, Japan’s GDP growth has handily beaten expectations this year and drawn the attention of American investors. With more domestic demand, brands like Sony could see their earnings improve over the next several years.

Is Sony a Good Buy at the Moment?

While good arguments exist both for and against Sony at the moment, it’s relatively clear that Wall Street is still largely unconvinced by the company’s growth story. In large part, this is likely due to the slow expected growth of the company’s bottom line and the competition Sony faces in the entertainment industry.

Although Sony is a strong company that trades at a decent price, there are likely better opportunities for investors in today’s market. If Japan’s economic rally continues and provides a stronger tailwind to Sony in the years to come, however, the stock could still be worth watching.

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