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Could Baxter International Inc.'s (NYSE:BAX) Investor Composition Influence The Stock Price?

Simply Wall St

The big shareholder groups in Baxter International Inc. (NYSE:BAX) have power over the company. Large companies usually have institutions as shareholders, and we usually see insiders owning shares in smaller companies. Companies that have been privatized tend to have low insider ownership.

Baxter International is a pretty big company. It has a market capitalization of US$45b. Normally institutions would own a significant portion of a company this size. In the chart below below, we can see that institutions own shares in the company. Let's delve deeper into each type of owner, to discover more about BAX.

See our latest analysis for Baxter International

NYSE:BAX Ownership Summary, September 10th 2019

What Does The Institutional Ownership Tell Us About Baxter International?

Institutions typically measure themselves against a benchmark when reporting to their own investors, so they often become more enthusiastic about a stock once it's included in a major index. We would expect most companies to have some institutions on the register, especially if they are growing.

Baxter International already has institutions on the share registry. Indeed, they own 87% of the company. 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 Baxter International's historic earnings and revenue, below, but keep in mind there's always more to the story.

NYSE:BAX Income Statement, September 10th 2019

Since institutional investors own more than half the issued stock, the board will likely have to pay attention to their preferences. Baxter International is not owned by hedge funds. There are a reasonable number of analysts covering the stock, so it might be useful to find out their aggregate view on the future.

Insider Ownership Of Baxter International

While the precise definition of an insider can be subjective, almost everyone considers board members to be insiders. 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.

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 Baxter 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$61m worth of shares. Arguably recent buying and selling is just as important to consider. You can click here to see if insiders have been buying or selling.

General Public Ownership

The general public, with a 13% stake in the company, will not easily be ignored. While this size of ownership may not be enough to sway a policy decision in their favour, they can still make a collective impact on company policies.

Next Steps:

It's always worth thinking about the different groups who own shares in a company. But to understand Baxter International better, we need to consider many other factors.

Many find it useful to take an in depth look at how a company has performed in the past. You can access this detailed graph of past earnings, revenue and cash flow .

Ultimately the future is most important. You can access this free report on analyst forecasts for the company.

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.

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned. Thank you for reading.