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Yahoo Finance Plus Institutional investors may overlook Dow Inc.'s (NYSE:DOW) recent US$2.2b market cap drop as long-term gains remain positive
Key Insights
Significantly high institutional ownership implies Dow's stock price is sensitive to their trading actions
A total of 25 investors have a majority stake in the company with 42% ownership
Analyst forecasts along with ownership data serve to give a strong idea about prospects for a business
A look at the shareholders of Dow Inc. (NYSE:DOW) can tell us which group is most powerful. We can see that institutions own the lion's share in the company with 66% ownership. Put another way, the group faces the maximum upside potential (or downside risk).
No shareholder likes losing money on their investments, especially institutional investors who saw their holdings drop 5.9% in value last week. However, the 22% 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.
In the chart below, we zoom in on the different ownership groups of Dow.
Check out our latest analysis for Dow
What Does The Institutional Ownership Tell Us About Dow?
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.
Dow already has institutions on the share registry. Indeed, they own a respectable stake in the company. This can indicate that the company has a certain degree of credibility in the investment community. However, it is best to be wary of relying on the supposed validation that comes with institutional investors. They too, get it wrong sometimes. If multiple institutions change their view on a stock at the same time, you could see the share price drop fast. It's therefore worth looking at Dow's earnings history below. Of course, the future is what really matters.
Since institutional investors own more than half the issued stock, the board will likely have to pay attention to their preferences. Dow is not owned by hedge funds. Looking at our data, we can see that the largest shareholder is The Vanguard Group, Inc. with 8.8% of shares outstanding. BlackRock, Inc. is the second largest shareholder owning 6.8% of common stock, and State Street Global Advisors, Inc. holds about 5.1% of the company stock.
On studying our ownership data, we found that 25 of the top shareholders collectively own less than 50% of the share register, implying that no single individual has a majority interest.
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 Dow
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.
I generally consider insider ownership to be a good thing. However, on some occasions it makes it more difficult for other shareholders to hold the board accountable for decisions.
Our data suggests that insiders own under 1% of Dow Inc. in their own names. Being so large, we would not expect insiders to own a large proportion of the stock. Collectively, they own US$50m of stock. 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, who are usually individual investors, hold a 34% stake in Dow. 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:
While it is well worth considering the different groups that own a company, there are other factors that are even more important. Consider for instance, the ever-present spectre of investment risk. We've identified 3 warning signs with Dow , and understanding them should be part of your investment process.
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.
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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.
