Yahoo Finance Institutional owners may ignore FedEx Corporation's (NYSE:FDX) recent US$3.9b market cap decline as longer-term profits stay in the green
Key Insights
Significantly high institutional ownership implies FedEx's stock price is sensitive to their trading actions
A total of 14 investors have a majority stake in the company with 50% ownership
To get a sense of who is truly in control of FedEx Corporation (NYSE:FDX), 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 80% ownership. Put another way, the group faces the maximum upside potential (or downside risk).
Institutional investors endured the highest losses after the company's market cap fell by US$3.9b last week. However, the 13% one-year return to shareholders might have softened the blow. But they would probably be wary of future losses.
Let's take a closer look to see what the different types of shareholders can tell us about FedEx.
Check out our latest analysis for FedEx
What Does The Institutional Ownership Tell Us About FedEx?
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.
FedEx 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. 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 FedEx'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 FedEx. The company's largest shareholder is The Vanguard Group, Inc., with ownership of 8.1%. In comparison, the second and third largest shareholders hold about 8.0% and 6.1% of the stock. Frederick Smith, who is the second-largest shareholder, also happens to hold the title of Top Key Executive.
Looking at the shareholder registry, we can see that 50% of the ownership is controlled by the top 14 shareholders, meaning that no single shareholder has a majority interest in the ownership.
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 plenty of analysts covering the stock, so it might be worth seeing what they are forecasting, too.
Insider Ownership Of FedEx
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.
Insider ownership is positive when it signals leadership are thinking like the true owners of the company. However, high insider ownership can also give immense power to a small group within the company. This can be negative in some circumstances.
We can report that insiders do own shares in FedEx Corporation. It is a very large company, and board members collectively own US$5.7b worth of shares (at current prices). we sometimes take an interest in whether they have been buying or selling.
General Public Ownership
The general public, who are usually individual investors, hold a 12% stake in FedEx. While this group can't necessarily call the shots, it can certainly have a real influence on how the company is run.
Next Steps:
While it is well worth considering the different groups that own a company, there are other factors that are even more important. Consider for instance, the ever-present spectre of investment risk. We've identified 2 warning signs with FedEx , and understanding them should be part of your investment process.
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.
