Parker-Hannifin Corporation's (NYSE:PH) large institutional owners must be happy as stock continues to impress, up 4.2% over the past week
Key Insights
Given the large stake in the stock by institutions, Parker-Hannifin's stock price might be vulnerable to their trading decisions
50% of the business is held by the top 22 shareholders
If you want to know who really controls Parker-Hannifin Corporation (NYSE:PH), then you'll have to look at the makeup of its share registry. The group holding the most number of shares in the company, around 85% to be precise, is institutions. That is, the group stands to benefit the most if the stock rises (or lose the most if there is a downturn).
And last week, institutional investors ended up benefitting the most after the company hit US$50b in market cap. One-year return to shareholders is currently 60% and last week’s gain was the icing on the cake.
In the chart below, we zoom in on the different ownership groups of Parker-Hannifin.
View our latest analysis for Parker-Hannifin
What Does The Institutional Ownership Tell Us About Parker-Hannifin?
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.
We can see that Parker-Hannifin 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 Parker-Hannifin's earnings history below. Of course, the future is what really matters.
Since institutional investors own more than half the issued stock, the board will likely have to pay attention to their preferences. We note that hedge funds don't have a meaningful investment in Parker-Hannifin. Our data shows that The Vanguard Group, Inc. is the largest shareholder with 8.1% of shares outstanding. In comparison, the second and third largest shareholders hold about 6.5% and 4.3% of the stock.
After doing some more digging, we found that the top 22 have the combined ownership of 50% 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 Parker-Hannifin
The definition of an insider can differ slightly between different countries, but members of the board of directors always count. 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. It is a very large company, so it would be surprising to see insiders own a large proportion of the company. Though their holding amounts to less than 1%, we can see that board members collectively own US$269m worth of shares (at current prices). 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
The general public, who are usually individual investors, hold a 14% stake in Parker-Hannifin. 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:
While it is well worth considering the different groups that own a company, there are other factors that are even more important. For example, we've discovered 3 warning signs for Parker-Hannifin that you should be aware of before investing here.
Ultimately the future is most important. You can access this free report on analyst forecasts for the company.
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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