With 0.9% one-year returns, institutional owners may ignore Philip Morris International Inc.'s (NYSE:PM) 3.8% stock price decline
Key Insights
Significantly high institutional ownership implies Philip Morris International's stock price is sensitive to their trading actions
A total of 15 investors have a majority stake in the company with 50% ownership
To get a sense of who is truly in control of Philip Morris International Inc. (NYSE:PM), it is important to understand the ownership structure of the business. We can see that institutions own the lion's share in the company with 78% ownership. Put another way, the group faces the maximum upside potential (or downside risk).
Institutional investors endured the highest losses after the company's market cap fell by US$5.9b last week. However, the 0.9% 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 Philip Morris International.
Check out our latest analysis for Philip Morris International
What Does The Institutional Ownership Tell Us About Philip Morris International?
Many institutions measure their performance against an index that approximates the local market. So they usually pay more attention to companies that are included in major indices.
As you can see, institutional investors have a fair amount of stake in Philip Morris International. This suggests some credibility amongst professional investors. But we can't rely on that fact alone since institutions make bad investments sometimes, just like everyone does. 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 Philip Morris International's historic earnings and revenue below, but keep in mind there's always more to the story.
Since institutional investors own more than half the issued stock, the board will likely have to pay attention to their preferences. Hedge funds don't have many shares in Philip Morris International. Capital Research and Management Company is currently the company's largest shareholder with 17% of shares outstanding. For context, the second largest shareholder holds about 8.6% of the shares outstanding, followed by an ownership of 6.6% by the third-largest shareholder.
Looking at the shareholder registry, we can see that 50% of the ownership is controlled by the top 15 shareholders, meaning that no single shareholder has a majority interest in the ownership.
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. There are plenty of analysts covering the stock, so it might be worth seeing what they are forecasting, too.
Insider Ownership Of Philip Morris International
While the precise definition of an insider can be subjective, almost everyone considers board members to be insiders. Company management run the business, but the CEO will answer to the board, even if he or she is a member of it.
Insider ownership is positive when it signals leadership are thinking like the true owners of the company. However, high insider ownership can also give immense power to a small group within the company. This can be negative in some circumstances.
Our information suggests that Philip Morris International Inc. insiders own under 1% of the company. As it is a large company, we'd only expect insiders to own a small percentage of it. But it's worth noting that they own US$213m worth of shares. It is good to see board members owning shares, but it might be worth checking if those insiders have been buying.
General Public Ownership
With a 22% ownership, the general public, mostly comprising of individual investors, have some degree of sway over Philip Morris International. 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 Philip Morris International better, we need to consider many other factors. Consider for instance, the ever-present spectre of investment risk. We've identified 3 warning signs with Philip Morris International (at least 2 which are significant) , and understanding them should be part of your investment process.
If you are like me, you may want to think about whether this company will grow or shrink. Luckily, you can check this free report showing analyst forecasts for its 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.
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