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In the wake of General Mills, Inc.'s (NYSE:GIS) latest US$1.2b market cap drop, institutional owners may be forced to take severe actions

Key Insights

  • Given the large stake in the stock by institutions, General Mills' stock price might be vulnerable to their trading decisions

  • The top 23 shareholders own 50% of the company

  • Insiders have been selling lately

If you want to know who really controls General Mills, Inc. (NYSE:GIS), then you'll have to look at the makeup of its share registry. And the group that holds the biggest piece of the pie are institutions with 78% ownership. Put another way, the group faces the maximum upside potential (or downside risk).

And institutional investors saw their holdings value drop by 3.2% last week. This set of investors may especially be concerned about the current loss, which adds to a one-year loss of 16% for shareholders. Often called “market movers", institutions wield significant power in influencing the price dynamics of any stock. As a result, if the downtrend continues, institutions may face pressures to sell General Mills, which might have negative implications on individual investors.

Let's take a closer look to see what the different types of shareholders can tell us about General Mills.

See our latest analysis for General Mills

ownership-breakdown
ownership-breakdown

What Does The Institutional Ownership Tell Us About General Mills?

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.

As you can see, institutional investors have a fair amount of stake in General Mills. 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. 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 General Mills, (below). Of course, keep in mind that there are other factors to consider, too.

earnings-and-revenue-growth
earnings-and-revenue-growth

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 General Mills. Looking at our data, we can see that the largest shareholder is The Vanguard Group, Inc. with 11% of shares outstanding. With 9.3% and 7.0% of the shares outstanding respectively, BlackRock, Inc. and Capital Research and Management Company are the second and third largest shareholders.

After doing some more digging, we found that the top 23 have the combined ownership of 50% in the company, suggesting that no single shareholder has significant control over the company.

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 General Mills

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.

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 data suggests that insiders own under 1% of General Mills, Inc. in their own names. As it is a large company, we'd only expect insiders to own a small percentage of it. But it's worth noting that they own US$113m worth of shares. In this sort of situation, it can be more interesting to see if those insiders have been buying or selling.

General Public Ownership

The general public, who are usually individual investors, hold a 21% stake in General Mills. 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. Take risks for example - General Mills has 1 warning sign we think you should be aware of.

If you are like me, you may want to think about whether this company will grow or shrink. Luckily, you can check this free report showing analyst forecasts for its future.

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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.