Institutional owners may ignore Sonoco Products Company's (NYSE:SON) recent US$224m market cap decline as longer-term profits stay in the green
Key Insights
Given the large stake in the stock by institutions, Sonoco Products' stock price might be vulnerable to their trading decisions
51% of the business is held by the top 15 shareholders
To get a sense of who is truly in control of Sonoco Products Company (NYSE:SON), it is important to understand the ownership structure of the business. With 78% stake, institutions possess the maximum shares in the company. That is, the group stands to benefit the most if the stock rises (or lose the most if there is a downturn).
No shareholder likes losing money on their investments, especially institutional investors who saw their holdings drop 3.6% in value last week. However, the 20% one-year return to shareholders might have softened the blow. 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 Sonoco Products.
View our latest analysis for Sonoco Products
What Does The Institutional Ownership Tell Us About Sonoco Products?
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.
Sonoco Products already has institutions on the share registry. Indeed, they own a respectable stake in the company. 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 Sonoco Products' 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 Sonoco Products. The company's largest shareholder is BlackRock, Inc., with ownership of 12%. In comparison, the second and third largest shareholders hold about 11% and 8.4% of the stock.
After doing some more digging, we found that the top 15 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 Sonoco Products
The definition of an insider can differ slightly between different countries, but members of the board of directors always count. Company management run the business, but the CEO will answer to the board, even if he or she is a member of it.
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 less than 1% of Sonoco Products Company. Keep in mind that it's a big company, and the insiders own US$48m worth of shares. The absolute value might be more important than the proportional share. It is always good to see at least some insider ownership, but it might be worth checking if those insiders have been selling.
General Public Ownership
With a 21% ownership, the general public, mostly comprising of individual investors, have some degree of sway over Sonoco Products. 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:
It's always worth thinking about the different groups who own shares in a company. But to understand Sonoco Products better, we need to consider many other factors. To that end, you should be aware of the 1 warning sign we've spotted with Sonoco Products .
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.
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