Institutional investors are Houlihan Lokey, Inc.'s (NYSE:HLI) biggest bettors and were rewarded after last week's US$282m market cap gain
Key Insights
Institutions' substantial holdings in Houlihan Lokey implies that they have significant influence over the company's share price
The top 19 shareholders own 51% of the company
Ownership research along with analyst forecasts data help provide a good understanding of opportunities in a stock
Every investor in Houlihan Lokey, Inc. (NYSE:HLI) should be aware of the most powerful shareholder groups. The group holding the most number of shares in the company, around 78% to be precise, is institutions. Put another way, the group faces the maximum upside potential (or downside risk).
And last week, institutional investors ended up benefitting the most after the company hit US$9.4b in market cap. One-year return to shareholders is currently 40% and last week’s gain was the icing on the cake.
Let's delve deeper into each type of owner of Houlihan Lokey, beginning with the chart below.
Check out our latest analysis for Houlihan Lokey
What Does The Institutional Ownership Tell Us About Houlihan Lokey?
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.
We can see that Houlihan Lokey 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 Houlihan Lokey's historic earnings and revenue below, but keep in mind there's always more to the story.
Institutional investors own over 50% of the company, so together than can probably strongly influence board decisions. Hedge funds don't have many shares in Houlihan Lokey. The company's largest shareholder is The Vanguard Group, Inc., with ownership of 7.4%. With 7.3% and 4.7% of the shares outstanding respectively, BlackRock, Inc. and EARNEST Partners, LLC are the second and third largest shareholders. In addition, we found that Scott Adelson, the CEO has 1.3% of the shares allocated to their name.
A closer look at our ownership figures suggests that the top 19 shareholders have a combined ownership of 51% implying that no single shareholder has a majority.
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. 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 Houlihan Lokey
The definition of an insider can differ slightly between different countries, but members of the board of directors always count. Company management run the business, but the CEO will answer to the board, even if he or she is a member of it.
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.
Shareholders would probably be interested to learn that insiders own shares in Houlihan Lokey, Inc.. The insiders have a meaningful stake worth US$507m. It is good to see this level of investment. You can check here to see if those insiders have been buying recently.
General Public Ownership
The general public, who are usually individual investors, hold a 16% stake in Houlihan Lokey. 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:
I find it very interesting to look at who exactly owns a company. But to truly gain insight, we need to consider other information, too. To that end, you should be aware of the 1 warning sign we've spotted with Houlihan Lokey .
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.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com