The big shareholder groups in Eaton Corporation plc (NYSE:ETN) have power over the company. Insiders often own a large chunk of younger, smaller, companies while huge companies tend to have institutions as shareholders. We also tend to see lower insider ownership in companies that were previously publicly owned.
With a market capitalization of US$51b, Eaton is rather large. We’d expect to see institutional investors on the register. Companies of this size are usually well known to retail investors, too. In the chart below, we can see that institutional investors have bought into the company. Let’s delve deeper into each type of owner, to discover more about Eaton.
View our latest analysis for Eaton
What Does The Institutional Ownership Tell Us About Eaton?
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.
Eaton already has institutions on the share registry. Indeed, they own a respectable stake in the company. 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. 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 Eaton, (below). Of course, keep in mind that there are other factors to consider, too.
Institutional investors own over 50% of the company, so together than can probably strongly influence board decisions. Eaton is not owned by hedge funds. The company’s largest shareholder is The Vanguard Group, Inc., with ownership of 8.7%. In comparison, the second and third largest shareholders hold about 7.0% and 5.2% of the stock.
Looking at the shareholder registry, we can see that 51% of the ownership is controlled by the top 22 shareholders, meaning that no single shareholder has a majority interest in the ownership.
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. Quite a few analysts cover the stock, so you could look into forecast growth quite easily.
Insider Ownership Of Eaton
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. 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.
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 most recent data indicates that insiders own less than 1% of Eaton Corporation plc. Being so large, we would not expect insiders to own a large proportion of the stock. Collectively, they own US$183m 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 17% ownership, the general public, mostly comprising of individual investors, have some degree of sway over Eaton. 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 Eaton better, we need to consider many other factors. Consider for instance, the ever-present spectre of investment risk. We’ve identified 4 warning signs with Eaton , and understanding them should be part of your investment process.
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.
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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.
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