Institutional owners may ignore Houlihan Lokey, Inc.'s (NYSE:HLI) recent US$346m market cap decline as longer-term profits stay in the green
Key Insights
Given the large stake in the stock by institutions, Houlihan Lokey's stock price might be vulnerable to their trading decisions
A total of 21 investors have a majority stake in the company with 51% ownership
Using data from analyst forecasts alongside ownership research, one can better assess the future performance of a company
If you want to know who really controls Houlihan Lokey, Inc. (NYSE:HLI), then you'll have to look at the makeup of its share registry. We can see that institutions own the lion's share in the company with 74% ownership. In other words, the group stands to gain the most (or lose the most) from their investment into the company.
Institutional investors endured the highest losses after the company's market cap fell by US$346m last week. However, the 30% 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 Houlihan Lokey, beginning with the chart below.
View our latest analysis for Houlihan Lokey
What Does The Institutional Ownership Tell Us About Houlihan Lokey?
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.
Houlihan Lokey already has institutions on the share registry. Indeed, they own a respectable stake in the company. 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. 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 Houlihan Lokey's earnings history below. Of course, the future is what really matters.
Investors should note that institutions actually own more than half the company, so they can collectively wield significant power. We note that hedge funds don't have a meaningful investment in Houlihan Lokey. The company's largest shareholder is The Vanguard Group, Inc., with ownership of 7.1%. EARNEST Partners, LLC is the second largest shareholder owning 4.5% of common stock, and BlackRock, Inc. holds about 4.4% of the company stock. Additionally, the company's CEO Scott Beiser directly holds 1.2% of the total shares outstanding.
After doing some more digging, we found that the top 21 have the combined ownership of 51% 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 Houlihan Lokey
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. 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.
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 Houlihan Lokey, Inc.. This is a big company, so it is good to see this level of alignment. Insiders own US$426m 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
The general public, who are usually individual investors, hold a 21% stake in Houlihan Lokey. While this group can't necessarily call the shots, it can certainly have a real influence on how the company is run.
Next Steps:
While it is well worth considering the different groups that own a company, there are other factors that are even more important. Take risks for example - Houlihan Lokey has 1 warning sign we think 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.
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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.
