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

COMMENTS

More Related News

Insiders are the top stockholders in Sarcos Technology and Robotics Corporation (NASDAQ:STRC), and the recent 19% drop might have disappointed them
Insiders are the top stockholders in Sarcos Technology and Robotics Corporation (NASDAQ:STRC), and the recent 19% drop might have disappointed them

If you want to know who really controls Sarcos Technology and Robotics Corporation ( NASDAQ:STRC ), then you'll have to...

With 88% ownership of the shares, Smith & Nephew plc (LON:SN.) is heavily dominated by institutional owners
With 88% ownership of the shares, Smith & Nephew plc (LON:SN.) is heavily dominated by institutional owners

A look at the shareholders of Smith & Nephew plc ( LON:SN. ) can tell us which group is most powerful. The group...

One Just Group plc (LON:JUST) insider upped their stake by 14% in the previous year
One Just Group plc (LON:JUST) insider upped their stake by 14% in the previous year

Insiders were net buyers of Just Group plc's ( LON:JUST ) stock during the past year. That is, insiders bought more...

A number of insiders bought LSL Property Services plc (LON:LSL) stock last year, which is great news for shareholders
A number of insiders bought LSL Property Services plc (LON:LSL) stock last year, which is great news for shareholders

It is usually uneventful when a single insider buys stock. However, When quite a few insiders buy shares, as it...

Individual investors own 32% of Delfi Limited (SGX:P34) shares but private companies control 51% of the company
Individual investors own 32% of Delfi Limited (SGX:P34) shares but private companies control 51% of the company

If you want to know who really controls Delfi Limited ( SGX:P34 ), then you'll have to look at the makeup of its share...

Leave a Comment

Your email address will not be published.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

Cancel reply

Comments

Top News: Business