U.S. Markets open in 4 hrs 40 mins
  • S&P Futures

    3,631.25
    -1.50 (-0.04%)
     
  • Dow Futures

    29,962.00
    -36.00 (-0.12%)
     
  • Nasdaq Futures

    12,109.50
    +33.50 (+0.28%)
     
  • Russell 2000 Futures

    1,849.30
    -2.20 (-0.12%)
     
  • Crude Oil

    45.30
    +0.39 (+0.87%)
     
  • Gold

    1,811.00
    +6.40 (+0.35%)
     
  • Silver

    23.50
    +0.20 (+0.84%)
     
  • EUR/USD

    1.1903
    +0.0007 (+0.0595%)
     
  • 10-Yr Bond

    0.8820
    0.0000 (0.00%)
     
  • Vix

    21.84
    -0.82 (-3.62%)
     
  • GBP/USD

    1.3339
    -0.0019 (-0.1427%)
     
  • USD/JPY

    104.3500
    -0.1300 (-0.1244%)
     
  • BTC-USD

    19,061.41
    +207.43 (+1.10%)
     
  • CMC Crypto 200

    378.09
    +8.34 (+2.26%)
     
  • FTSE 100

    6,422.64
    -9.53 (-0.15%)
     
  • Nikkei 225

    26,296.86
    +131.27 (+0.50%)
     

Is Cummins Inc. (NYSE:CMI) Popular Amongst Institutions?

Simply Wall St
·4 min read

Every investor in Cummins Inc. (NYSE:CMI) should be aware of the most powerful shareholder groups. Large companies usually have institutions as shareholders, and we usually see insiders owning shares in smaller companies. Companies that used to be publicly owned tend to have lower insider ownership.

With a market capitalization of US$33b, Cummins is rather large. We'd expect to see institutional investors on the register. Companies of this size are usually well known to retail investors, too. Our analysis of the ownership of the company, below, shows that institutional investors have bought into the company. Let's take a closer look to see what the different types of shareholders can tell us about Cummins.

See our latest analysis for Cummins

ownership-breakdown
ownership-breakdown

What Does The Institutional Ownership Tell Us About Cummins?

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.

As you can see, institutional investors have a fair amount of stake in Cummins. 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. 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 Cummins' historic earnings and revenue below, but keep in mind there's always more to the story.

earnings-and-revenue-growth
earnings-and-revenue-growth

Investors should note that institutions actually own more than half the company, so they can collectively wield significant power. Hedge funds don't have many shares in Cummins. Our data shows that The Vanguard Group, Inc. is the largest shareholder with 9.0% of shares outstanding. For context, the second largest shareholder holds about 8.6% of the shares outstanding, followed by an ownership of 4.8% by the third-largest shareholder.

After doing some more digging, we found that the top 20 have the combined ownership of 50% in the company, suggesting that no single shareholder has significant control over the company.

While studying institutional ownership for a company can add value to your research, it is also a good practice to research analyst recommendations to get a deeper understand of a stock's expected performance. Quite a few analysts cover the stock, so you could look into forecast growth quite easily.

Insider Ownership Of Cummins

The definition of company insiders can be subjective and does vary between jurisdictions. Our data reflects individual insiders, capturing board members at the very least. 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 most recent data indicates that insiders own less than 1% of Cummins Inc.. 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$140m worth of shares. It is always good to see at least some insider ownership, but it might be worth checking if those insiders have been selling.

General Public Ownership

With a 14% ownership, the general public have some degree of sway over Cummins. This size of ownership, while considerable, may not be enough to change company policy if the decision is not in sync with other large shareholders.

Next Steps:

It's always worth thinking about the different groups who own shares in a company. But to understand Cummins better, we need to consider many other factors. For instance, we've identified 1 warning sign for Cummins that you should be aware of.

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.

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. 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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com.