Institutional investors may overlook Portillo's Inc.'s (NASDAQ:PTLO) recent US$51m market cap drop as long-term gains remain positive
Key Insights
Significantly high institutional ownership implies Portillo's' stock price is sensitive to their trading actions
The top 11 shareholders own 52% of the company
If you want to know who really controls Portillo's Inc. (NASDAQ:PTLO), then you'll have to look at the makeup of its share registry. The group holding the most number of shares in the company, around 67% to be precise, is institutions. 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 4.3% in value last week. However, the 11% one-year return to shareholders might have softened the blow. They should, however, be mindful of further losses in the future.
In the chart below, we zoom in on the different ownership groups of Portillo's.
Check out our latest analysis for Portillo's
What Does The Institutional Ownership Tell Us About Portillo's?
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.
We can see that Portillo's does have institutional investors; and they hold a good portion of the company's stock. 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. 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 Portillo's' historic earnings and revenue below, but keep in mind there's always more to the story.
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 Portillo's. Looking at our data, we can see that the largest shareholder is Berkshire Partners LLC with 11% of shares outstanding. In comparison, the second and third largest shareholders hold about 9.0% and 8.0% of the stock. In addition, we found that Michael Osanloo, the CEO has 3.0% of the shares allocated to their name.
After doing some more digging, we found that the top 11 have the combined ownership of 52% in the company, suggesting that no single shareholder has significant control over the company.
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 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 Portillo's
While the precise definition of an insider can be subjective, almost everyone considers board members to be insiders. 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 most recent data indicates that insiders own some shares in Portillo's Inc.. This is a big company, so it is good to see this level of alignment. Insiders own US$83m worth of shares (at current prices). If you would like to explore the question of insider alignment, you can click here to see if insiders have been buying or selling.
General Public Ownership
With a 17% ownership, the general public, mostly comprising of individual investors, have some degree of sway over Portillo's. 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.
Private Equity Ownership
With a stake of 11%, private equity firms could influence the Portillo's board. Some might like this, because private equity are sometimes activists who hold management accountable. But other times, private equity is selling out, having taking the company public.
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. To that end, you should learn about the 2 warning signs we've spotted with Portillo's (including 1 which can't be ignored) .
But ultimately it is the future, not the past, that will determine how well the owners of this business will do. Therefore we think it advisable to take a look at this free report showing whether analysts are predicting a brighter 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.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.
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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