With 77% institutional ownership, Southwest Airlines Co. (NYSE:LUV) is a favorite amongst the big guns
Key Insights
Significantly high institutional ownership implies Southwest Airlines' stock price is sensitive to their trading actions
A total of 13 investors have a majority stake in the company with 51% ownership
Analyst forecasts along with ownership data serve to give a strong idea about prospects for a business
A look at the shareholders of Southwest Airlines Co. (NYSE:LUV) can tell us which group is most powerful. We can see that institutions own the lion's share in the company with 77% ownership. In other words, the group stands to gain the most (or lose the most) from their investment into the company.
Since institutional have access to huge amounts of capital, their market moves tend to receive a lot of scrutiny by retail or individual investors. Hence, having a considerable amount of institutional money invested in a company is often regarded as a desirable trait.
Let's delve deeper into each type of owner of Southwest Airlines, beginning with the chart below.
View our latest analysis for Southwest Airlines
What Does The Institutional Ownership Tell Us About Southwest Airlines?
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.
Southwest Airlines already has institutions on the share registry. Indeed, they own a respectable stake in the company. This implies the analysts working for those institutions have looked at the stock and they like it. But just like anyone else, they could be wrong. 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 Southwest Airlines, (below). Of course, keep in mind that there are other factors to consider, too.
Investors should note that institutions actually own more than half the company, so they can collectively wield significant power. Southwest Airlines is not owned by hedge funds. The Vanguard Group, Inc. is currently the company's largest shareholder with 11% of shares outstanding. For context, the second largest shareholder holds about 8.8% of the shares outstanding, followed by an ownership of 6.7% by the third-largest shareholder.
Looking at the shareholder registry, we can see that 51% of the ownership is controlled by the top 13 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. Quite a few analysts cover the stock, so you could look into forecast growth quite easily.
Insider Ownership Of Southwest Airlines
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.
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 data suggests that insiders own under 1% of Southwest Airlines Co. in their own names. It is a very large company, so it would be surprising to see insiders own a large proportion of the company. Though their holding amounts to less than 1%, we can see that board members collectively own US$68m worth of shares (at current prices). In this sort of situation, it can be more interesting to see if those insiders have been buying or selling.
General Public Ownership
The general public-- including retail investors -- own 23% stake in the company, and hence can't easily be ignored. While this group can't necessarily call the shots, it can certainly have a real influence on how the company is run.
Next Steps:
While it is well worth considering the different groups that own a company, there are other factors that are even more important. For instance, we've identified 3 warning signs for Southwest Airlines that you should be aware of.
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.
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