Institutional investors are Emerson Electric Co.'s (NYSE:EMR) biggest bettors and were rewarded after last week's US$2.9b market cap gain
Key Insights
Given the large stake in the stock by institutions, Emerson Electric's stock price might be vulnerable to their trading decisions
45% of the business is held by the top 25 shareholders
Ownership research along with analyst forecasts data help provide a good understanding of opportunities in a stock
A look at the shareholders of Emerson Electric Co. (NYSE:EMR) can tell us which group is most powerful. And the group that holds the biggest piece of the pie are institutions with 76% ownership. In other words, the group stands to gain the most (or lose the most) from their investment into the company.
Last week’s 4.7% gain means that institutional investors were on the positive end of the spectrum even as the company has shown strong longer-term trends. One-year return to shareholders is currently 27% and last week’s gain was the icing on the cake.
In the chart below, we zoom in on the different ownership groups of Emerson Electric.
See our latest analysis for Emerson Electric
What Does The Institutional Ownership Tell Us About Emerson Electric?
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 Emerson Electric. 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 Emerson Electric'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. Emerson Electric is not owned by hedge funds. The Vanguard Group, Inc. is currently the company's largest shareholder with 9.1% of shares outstanding. Meanwhile, the second and third largest shareholders, hold 6.2% and 4.2%, 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.
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 a reasonable number of analysts covering the stock, so it might be useful to find out their aggregate view on the future.
Insider Ownership Of Emerson Electric
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.
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 Emerson Electric Co.. Being so large, we would not expect insiders to own a large proportion of the stock. Collectively, they own US$246m 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
With a 23% ownership, the general public, mostly comprising of individual investors, have some degree of sway over Emerson Electric. While this group can't necessarily call the shots, it can certainly have a real influence on how the company is run.
Next Steps:
It's always worth thinking about the different groups who own shares in a company. But to understand Emerson Electric better, we need to consider many other factors. For example, we've discovered 1 warning sign for Emerson Electric that you should be aware of before investing here.
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.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com