Institutional owners may take dramatic actions as American Financial Group, Inc.'s (NYSE:AFG) recent 6.4% drop adds to one-year losses
Key Insights
Given the large stake in the stock by institutions, American Financial Group's stock price might be vulnerable to their trading decisions
The top 7 shareholders own 52% of the company
A look at the shareholders of American Financial Group, Inc. (NYSE:AFG) can tell us which group is most powerful. And the group that holds the biggest piece of the pie are institutions with 66% ownership. In other words, the group stands to gain the most (or lose the most) from their investment into the company.
And so it follows that institutional investors was the group most impacted after the company's market cap fell to US$9.7b last week after a 6.4% drop in the share price. The recent loss, which adds to a one-year loss of 5.0% for stockholders, may not sit well with this group of investors. Often called “market movers", institutions wield significant power in influencing the price dynamics of any stock. As a result, if the decline continues, institutional investors may be pressured to sell American Financial Group which might hurt individual investors.
Let's take a closer look to see what the different types of shareholders can tell us about American Financial Group.
Check out our latest analysis for American Financial Group
What Does The Institutional Ownership Tell Us About American Financial Group?
Institutional investors commonly compare their own returns to the returns of a commonly followed index. So they generally do consider buying larger companies that are included in the relevant benchmark index.
We can see that American Financial Group does have institutional investors; and they hold a good portion of the company's stock. 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. 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 American Financial Group's earnings history below. Of course, the future is what really matters.
Institutional investors own over 50% of the company, so together than can probably strongly influence board decisions. American Financial Group is not owned by hedge funds. Because actions speak louder than words, we consider it a good sign when insiders own a significant stake in a company. In American Financial Group's case, its Co-Chief Executive Officer, Carl Lindner, is the largest shareholder, holding 14% of shares outstanding. With 10% and 9.5% of the shares outstanding respectively, BlackRock, Inc. and The Vanguard Group, Inc. are the second and third largest shareholders. Furthermore, CEO Stephen Lindner is the owner of 5.6% of the company's shares.
We did some more digging and found that 7 of the top shareholders account for roughly 52% of the register, implying that along with larger shareholders, there are a few smaller shareholders, thereby balancing out each others interests somewhat.
While it makes sense to study institutional ownership data for a company, it also makes sense to study analyst sentiments to know which way the wind is blowing. There are plenty of analysts covering the stock, so it might be worth seeing what they are forecasting, too.
Insider Ownership Of American Financial Group
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.
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 most recent data indicates that insiders own a reasonable proportion of American Financial Group, Inc.. It has a market capitalization of just US$9.7b, and insiders have US$2.2b worth of shares in their own names. That's quite significant. It is good to see this level of investment. You can check here to see if those insiders have been buying recently.
General Public Ownership
The general public, who are usually individual investors, hold a 12% stake in American Financial Group. 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:
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 be aware of the 1 warning sign we've spotted with American Financial Group .
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.
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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.
