Parker-Hannifin Corporation (NYSE:PH) is a favorite amongst institutional investors who own 84%
Key Insights
Given the large stake in the stock by institutions, Parker-Hannifin's stock price might be vulnerable to their trading decisions
A total of 25 investors have a majority stake in the company with 50% ownership
To get a sense of who is truly in control of Parker-Hannifin Corporation (NYSE:PH), it is important to understand the ownership structure of the business. And the group that holds the biggest piece of the pie are institutions with 84% ownership. Put another way, the group faces the maximum upside potential (or downside risk).
Given the vast amount of money and research capacities at their disposal, institutional ownership tends to carry a lot of weight, especially with individual investors. As a result, a sizeable amount of institutional money invested in a firm is generally viewed as a positive attribute.
Let's delve deeper into each type of owner of Parker-Hannifin, beginning with the chart below.
Check out our latest analysis for Parker-Hannifin
What Does The Institutional Ownership Tell Us About Parker-Hannifin?
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.
As you can see, institutional investors have a fair amount of stake in Parker-Hannifin. 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 Parker-Hannifin'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 Parker-Hannifin. The Vanguard Group, Inc. is currently the company's largest shareholder with 8.1% of shares outstanding. BlackRock, Inc. is the second largest shareholder owning 6.5% of common stock, and State Street Global Advisors, Inc. holds about 4.2% of the company stock.
Looking at the shareholder registry, we can see that 50% of the ownership is controlled by the top 25 shareholders, meaning that no single shareholder has a majority interest in the ownership.
While studying institutional ownership for a company can add value to your research, it is also a good practice to research analyst recommendations to get a deeper understand of a stock's expected performance. 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 Parker-Hannifin
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 less than 1% of Parker-Hannifin Corporation. As it is a large company, we'd only expect insiders to own a small percentage of it. But it's worth noting that they own US$285m worth of shares. 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 15% ownership, the general public, mostly comprising of individual investors, have some degree of sway over Parker-Hannifin. While this group can't necessarily call the shots, it can certainly have a real influence on how the company is run.
Next Steps:
It's always worth thinking about the different groups who own shares in a company. But to understand Parker-Hannifin better, we need to consider many other factors. Be aware that Parker-Hannifin is showing 2 warning signs in our investment analysis , you should know about...
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.
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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.
