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Institutional owners may consider drastic measures as Target Corporation's (NYSE:TGT) recent US$3.2b drop adds to long-term losses

Key Insights

  • Given the large stake in the stock by institutions, Target's stock price might be vulnerable to their trading decisions

  • A total of 22 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

A look at the shareholders of Target Corporation (NYSE:TGT) can tell us which group is most powerful. And the group that holds the biggest piece of the pie are institutions with 82% ownership. In other words, the group stands to gain the most (or lose the most) from their investment into the company.

And so it follows that institutional investors was the group most impacted after the company's market cap fell to US$72b last week after a 4.3% drop in the share price. Needless to say, the recent loss which further adds to the one-year loss to shareholders of 27% might not go down well especially with this category of shareholders. Institutions or "liquidity providers" control large sums of money and therefore, these types of investors usually have a lot of influence over stock price movements. As a result, if the decline continues, institutional investors may be pressured to sell Target which might hurt individual investors.

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In the chart below, we zoom in on the different ownership groups of Target.

View our latest analysis for Target

ownership-breakdown
ownership-breakdown

What Does The Institutional Ownership Tell Us About Target?

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.

Target already has institutions on the share registry. Indeed, they own a respectable stake in the company. This can indicate that the company has a certain degree of credibility in the investment community. However, it is best to be wary of relying on the supposed validation that comes with institutional investors. They too, get it wrong sometimes. 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 Target, (below). Of course, keep in mind that there are other factors to consider, too.

earnings-and-revenue-growth
earnings-and-revenue-growth

Investors should note that institutions actually own more than half the company, so they can collectively wield significant power. Target is not owned by hedge funds. The Vanguard Group, Inc. is currently the company's largest shareholder with 9.3% of shares outstanding. BlackRock, Inc. is the second largest shareholder owning 7.4% of common stock, and State Street Global Advisors, Inc. holds about 7.2% of the company stock.

After doing some more digging, we found that the top 22 have the combined ownership of 51% in the company, suggesting that no single shareholder has significant control over the company.

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 Target

The definition of company insiders can be subjective and does vary between jurisdictions. Our data reflects individual insiders, capturing board members at the very least. 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 data suggests that insiders own under 1% of Target Corporation in their own names. Being so large, we would not expect insiders to own a large proportion of the stock. Collectively, they own US$187m of stock. It is good to see board members owning shares, but it might be worth checking if those insiders have been buying.

General Public Ownership

The general public, who are usually individual investors, hold a 18% stake in Target. 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. To that end, you should learn about the 4 warning signs we've spotted with Target (including 1 which makes us a bit uncomfortable) .

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.

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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