Yahoo Finance McKesson Corporation's (NYSE:MCK) institutional investors lost 11% last week but have benefitted from longer-term gains
Key Insights
Given the large stake in the stock by institutions, McKesson's stock price might be vulnerable to their trading decisions
50% of the business is held by the top 24 shareholders
Analyst forecasts along with ownership data serve to give a strong idea about prospects for a business
If you want to know who really controls McKesson Corporation (NYSE:MCK), then you'll have to look at the makeup of its share registry. We can see that institutions own the lion's share in the company with 88% 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 was the group most impacted after the company's market cap fell to US$66b last week. Still, the 22% one-year gains may have helped mitigate their overall losses. But they would probably be wary of future losses.
In the chart below, we zoom in on the different ownership groups of McKesson.
Check out our latest analysis for McKesson
What Does The Institutional Ownership Tell Us About McKesson?
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 McKesson 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. 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 McKesson'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 McKesson. The company's largest shareholder is The Vanguard Group, Inc., with ownership of 9.2%. BlackRock, Inc. is the second largest shareholder owning 8.8% of common stock, and State Street Global Advisors, Inc. holds about 4.6% of the company stock.
Looking at the shareholder registry, we can see that 50% of the ownership is controlled by the top 24 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 McKesson
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.
Most consider insider ownership a positive because it can indicate the board is well aligned with other shareholders. However, on some occasions too much power is concentrated within this group.
Our most recent data indicates that insiders own less than 1% of McKesson Corporation. Being so large, we would not expect insiders to own a large proportion of the stock. Collectively, they own US$64m 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-- including retail investors -- own 11% stake in the company, and hence can't easily be ignored. 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. Take risks for example - McKesson has 1 warning sign we think you should be aware of.
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.
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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.
