Institutional investors may overlook Arthur J. Gallagher & Co.'s (NYSE:AJG) recent US$3.9b market cap drop as long-term gains remain positive
Key Insights
Given the large stake in the stock by institutions, Arthur J. Gallagher's stock price might be vulnerable to their trading decisions
A total of 14 investors have a majority stake in the company with 51% ownership
Every investor in Arthur J. Gallagher & Co. (NYSE:AJG) should be aware of the most powerful shareholder groups. We can see that institutions own the lion's share in the company with 87% ownership. In other words, the group stands to gain the most (or lose the most) from their investment into the company.
No shareholder likes losing money on their investments, especially institutional investors who saw their holdings drop 7.5% in value last week. However, the 21% one-year return to shareholders may have helped lessen their pain. They should, however, be mindful of further losses in the future.
Let's delve deeper into each type of owner of Arthur J. Gallagher, beginning with the chart below.
View our latest analysis for Arthur J. Gallagher
What Does The Institutional Ownership Tell Us About Arthur J. Gallagher?
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 Arthur J. Gallagher. 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 Arthur J. Gallagher, (below). Of course, keep in mind that there are other factors to consider, too.
Since institutional investors own more than half the issued stock, the board will likely have to pay attention to their preferences. Arthur J. Gallagher is not owned by hedge funds. The Vanguard Group, Inc. is currently the company's largest shareholder with 12% of shares outstanding. In comparison, the second and third largest shareholders hold about 7.9% and 6.3% of the stock.
A closer look at our ownership figures suggests that the top 14 shareholders have a combined ownership of 51% implying that no single shareholder has a majority.
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. There are plenty of analysts covering the stock, so it might be worth seeing what they are forecasting, too.
Insider Ownership Of Arthur J. Gallagher
While the precise definition of an insider can be subjective, almost everyone considers board members to be insiders. The company management answer to the board and the latter should represent the interests of shareholders. Notably, sometimes top-level managers are on the board themselves.
Most consider insider ownership a positive because it can indicate the board is well aligned with other shareholders. However, on some occasions too much power is concentrated within this group.
Shareholders would probably be interested to learn that insiders own shares in Arthur J. Gallagher & Co.. It is a very large company, and board members collectively own US$552m worth of shares (at current prices). Most would say this shows a good alignment of interests between shareholders and the board. Still, it might be worth checking if those insiders have been selling.
General Public Ownership
The general public, who are usually individual investors, hold a 12% stake in Arthur J. Gallagher. While this group can't necessarily call the shots, it can certainly have a real influence on how the company is run.
Next Steps:
I find it very interesting to look at who exactly owns a company. But to truly gain insight, we need to consider other information, too. For instance, we've identified 4 warning signs for Arthur J. Gallagher 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.
