With 71% ownership of the shares, Caterpillar Inc. (NYSE:CAT) is heavily dominated by institutional owners

  • In Business
  • 2022-10-01 11:00:14Z
  • By Simply Wall St.

A look at the shareholders of Caterpillar Inc. (NYSE:CAT) can tell us which group is most powerful. The group holding the most number of shares in the company, around 71% to be precise, is institutions. That is, the group stands to benefit the most if the stock rises (or lose the most if there is a downturn).

Given the vast amount of money and research capacities at their disposal, institutional ownership tends to carry a lot of weight, especially with individual investors. Therefore, a good portion of institutional money invested in the company is usually a huge vote of confidence on its future.

Let's delve deeper into each type of owner of Caterpillar, beginning with the chart below.

See our latest analysis for Caterpillar

What Does The Institutional Ownership Tell Us About Caterpillar?

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 Caterpillar 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. 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 Caterpillar'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 Caterpillar. The Vanguard Group, Inc. is currently the largest shareholder, with 9.2% of shares outstanding. For context, the second largest shareholder holds about 7.5% of the shares outstanding, followed by an ownership of 7.0% by the third-largest shareholder.

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 studying institutional ownership for a company can add value to your research, it is also a good practice to research analyst recommendations to get a deeper understand of a stock's expected performance. Quite a few analysts cover the stock, so you could look into forecast growth quite easily.

Insider Ownership Of Caterpillar

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.

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.

Our data suggests that insiders own under 1% of Caterpillar Inc. in their own names. Being so large, we would not expect insiders to own a large proportion of the stock. Collectively, they own US$171m 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, who are usually individual investors, hold a 29% stake in Caterpillar. 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:

While it is well worth considering the different groups that own a company, there are other factors that are even more important. Case in point: We've spotted 1 warning sign for Caterpillar you should be aware of.

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.

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.

Join A Paid User Research Session
You'll receive a US$30 Amazon Gift card for 1 hour of your time while helping us build better investing tools for the individual investors like yourself. Sign up here


More Related News

OSK Holdings Berhad
OSK Holdings Berhad's (KLSE:OSK) largest shareholders are private companies with 50% ownership, individual investors own 29%

Every investor in OSK Holdings Berhad ( KLSE:OSK ) should be aware of the most powerful shareholder groups. With 50...

Institutions profited after Xero Limited
Institutions profited after Xero Limited's (ASX:XRO) market cap rose AU$916m last week butindividual investors profited the most

To get a sense of who is truly in control of Xero Limited ( ASX:XRO ), it is important to understand the ownership...

Great news for Zoom2u Technologies Limited (ASX:Z2U): Insiders acquired stock in large numbers last year
Great news for Zoom2u Technologies Limited (ASX:Z2U): Insiders acquired stock in large numbers last year

When a single insider purchases stock, it is typically not a major deal. However, when multiple insiders purchase...

Dropsuite Limited (ASX:DSE) stock most popular amongst individual investors who own 53%, while hedge funds hold 24%
Dropsuite Limited (ASX:DSE) stock most popular amongst individual investors who own 53%, while hedge funds hold 24%

If you want to know who really controls Dropsuite Limited ( ASX:DSE ), then you'll have to look at the makeup of its...

Trade Alert: The Independent Non-Executive Chairman Of DiscovEx Resources Limited (ASX:DCX), Heath Hellewell, Has Just Spent AU$100k Buying 45% More Shares
Trade Alert: The Independent Non-Executive Chairman Of DiscovEx Resources Limited (ASX:DCX), Heath Hellewell, Has Just Spent AU$100k Buying 45% More Shares

Even if it's not a huge purchase, we think it was good to see that Heath Hellewell, the Independent Non-Executive...

Leave a Comment

Your email address will not be published. Required fields are marked with *

Cancel reply


Top News: Business