Yahoo Finance After losing 3.5% in the past year, International Business Machines Corporation (NYSE:IBM) institutional owners must be relieved by the recent gain
To get a sense of who is truly in control of International Business Machines Corporation (NYSE:IBM), it is important to understand the ownership structure of the business. We can see that institutions own the lion's share in the company with 57% ownership. That is, the group stands to benefit the most if the stock rises (or lose the most if there is a downturn).
Institutional investors would appreciate the 3.1% increase in share prices last week, given their one-year returns have been disappointing at 3.5%.
Let's delve deeper into each type of owner of International Business Machines, beginning with the chart below.
View our latest analysis for International Business Machines
What Does The Institutional Ownership Tell Us About International Business Machines?
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.
We can see that International Business Machines does have institutional investors; and they hold a good portion of the company's stock. 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 International Business Machines, (below). Of course, keep in mind that there are other factors to consider, too.
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 International Business Machines. Our data shows that The Vanguard Group, Inc. is the largest shareholder with 8.6% of shares outstanding. Meanwhile, the second and third largest shareholders, hold 7.7% and 5.9%, of the shares outstanding, respectively.
Our studies suggest that the top 25 shareholders collectively control less than half of the company's shares, meaning that the company's shares are widely disseminated and there is no dominant shareholder.
While it makes sense to study institutional ownership data for a company, it also makes sense to study analyst sentiments to know which way the wind is blowing. Quite a few analysts cover the stock, so you could look into forecast growth quite easily.
Insider Ownership Of International Business Machines
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 information suggests that International Business Machines Corporation insiders own under 1% of the company. Being so large, we would not expect insiders to own a large proportion of the stock. Collectively, they own US$90m of stock. Arguably recent buying and selling is just as important to consider. You can click here to see if insiders have been buying or selling.
General Public Ownership
With a 43% ownership, the general public, mostly comprising of individual investors, have some degree of sway over International Business Machines. 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.
Next Steps:
It's always worth thinking about the different groups who own shares in a company. But to understand International Business Machines better, we need to consider many other factors. Consider for instance, the ever-present spectre of investment risk. We've identified 2 warning signs with International Business Machines (at least 1 which is significant) , 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.
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