The big shareholder groups in Houlihan Lokey, Inc. (NYSE:HLI) have power over the company. Generally speaking, as a company grows, institutions will increase their ownership. Conversely, insiders often decrease their ownership over time. I generally like to see some degree of insider ownership, even if only a little. As Nassim Nicholas Taleb said, 'Don’t tell me what you think, tell me what you have in your portfolio.
Houlihan Lokey is a pretty big company. It has a market capitalization of US$4.1b. Normally institutions would own a significant portion of a company this size. Taking a look at our data on the ownership groups (below), it seems that institutions are noticeable on the share registry. Let's take a closer look to see what the different types of shareholders can tell us about Houlihan Lokey.
What Does The Institutional Ownership Tell Us About Houlihan Lokey?
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.
We can see that Houlihan Lokey 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. 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 Houlihan Lokey'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. Houlihan Lokey is not owned by hedge funds. Our data shows that The Vanguard Group, Inc. is the largest shareholder with 6.5% of shares outstanding. For context, the second largest shareholder holds about 4.8% of the shares outstanding, followed by an ownership of 3.6% by the third-largest shareholder. Furthermore, CEO Scott Beiser is the owner of 1.3% of the company's shares.
A closer look at our ownership figures suggests that the top 23 shareholders have a combined ownership of 51% implying that no single shareholder has a majority.
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
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.
Most consider insider ownership a positive because it can indicate the board is well aligned with other shareholders. However, on some occasions too much power is concentrated within this group.
I can report that insiders do own shares in Houlihan Lokey, Inc.. It is a pretty big company, so it is generally a positive to see some potentially meaningful alignment. In this case, they own around US$353m worth of shares (at current prices). Most would say this shows alignment of interests between shareholders and the board. Still, it might be worth checking if those insiders have been selling.
General Public Ownership
The general public, with a 18% stake in the company, will not easily be ignored. While this group can't necessarily call the shots, it can certainly have a real influence on how the company is run.
It's always worth thinking about the different groups who own shares in a company. But to understand Houlihan Lokey better, we need to consider many other factors. For instance, we've identified 2 warning signs for Houlihan Lokey that you should be aware of.
If you would prefer discover what analysts are predicting in terms of future growth, do not miss this free report on analyst forecasts.
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.
This article by Simply Wall St is general in nature. 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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