Yahoo Finance Institutional investors may adopt severe steps after HP Inc.'s (NYSE:HPQ) latest 6.4% drop adds to a year losses
Key Insights
Institutions' substantial holdings in HP implies that they have significant influence over the company's share price
A total of 12 investors have a majority stake in the company with 51% ownership
Analyst forecasts along with ownership data serve to give a strong idea about prospects for a business
Every investor in HP Inc. (NYSE:HPQ) should be aware of the most powerful shareholder groups. With 67% stake, institutions possess the maximum shares in the company. Put another way, the group faces the maximum upside potential (or downside risk).
And so it follows that institutional investors was the group most impacted after the company's market cap fell to US$30b last week after a 6.4% drop in the share price. Needless to say, the recent loss which further adds to the one-year loss to shareholders of 23% might not go down well especially with this category of shareholders. Also referred to as "smart money", institutions have a lot of sway over how a stock's price moves. Hence, if weakness in HP's share price continues, institutional investors may feel compelled to sell the stock, which might not be ideal for individual investors.
Let's delve deeper into each type of owner of HP, beginning with the chart below.
View our latest analysis for HP
What Does The Institutional Ownership Tell Us About HP?
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.
As you can see, institutional investors have a fair amount of stake in HP. 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. It is not uncommon to see a big share price drop if two large institutional investors try to sell out of a stock at the same time. So it is worth checking the past earnings trajectory of HP, (below). Of course, keep in mind that there are other factors to consider, too.
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 HP. Berkshire Hathaway Inc. is currently the largest shareholder, with 12% of shares outstanding. BlackRock, Inc. is the second largest shareholder owning 9.4% of common stock, and The Vanguard Group, Inc. holds about 9.3% of the company stock.
A closer look at our ownership figures suggests that the top 12 shareholders have a combined ownership of 51% implying that no single shareholder has a majority.
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. Quite a few analysts cover the stock, so you could look into forecast growth quite easily.
Insider Ownership Of HP
While the precise definition of an insider can be subjective, almost everyone considers board members to be insiders. Management ultimately answers to the board. However, it is not uncommon for managers to be executive board members, especially if they are a founder or the CEO.
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 HP Inc.. 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$61m 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
The general public, who are usually individual investors, hold a 21% stake in HP. While this size of ownership may not be enough to sway a policy decision in their favour, they can still make a collective impact on company policies.
Public Company Ownership
We can see that public companies hold 12% of the HP shares on issue. We can't be certain but it is quite possible this is a strategic stake. The businesses may be similar, or work together.
Next Steps:
It's always worth thinking about the different groups who own shares in a company. But to understand HP better, we need to consider many other factors. To that end, you should learn about the 5 warning signs we've spotted with HP (including 1 which is significant) .
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.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.
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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