Every investor in The Home Depot, Inc. (NYSE:HD) should be aware of the most powerful shareholder groups. And the group that holds the biggest piece of the pie are institutions with 73% ownership. Put another way, the group faces the maximum upside potential (or downside risk).
Last week’s US$16b market cap gain would probably be appreciated by institutional investors, especially after a year of 3.3% losses.
Let’s take a closer look to see what the different types of shareholders can tell us about Home Depot.
What Does The Institutional Ownership Tell Us About Home Depot?
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 Home Depot 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. 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 Home Depot, (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. Hedge funds don’t have many shares in Home Depot. The Vanguard Group, Inc. is currently the largest shareholder, with 9.8% of shares outstanding. In comparison, the second and third largest shareholders hold about 7.7% and 4.6% of the stock.
A deeper look at our ownership data shows that the top 25 shareholders collectively hold less than half of the register, suggesting a large group of small holders where 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 Home Depot
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.
Most consider insider ownership a positive because it can indicate the board is well aligned with other shareholders. However, on some occasions too much power is concentrated within this group.
Our most recent data indicates that insiders own less than 1% of The Home Depot, Inc.. It is a very large company, so it would be surprising to see insiders own a large proportion of the company. Though their holding amounts to less than 1%, we can see that board members collectively own US$222m worth of shares (at current prices). Arguably recent buying and selling is just as important to consider. You can click here to see if insiders have been buying or selling.
General Public Ownership
The general public– including retail investors — own 27% stake in the company, and hence can’t easily be ignored. 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:
It’s always worth thinking about the different groups who own shares in a company. But to understand Home Depot better, we need to consider many other factors. For example, we’ve discovered 2 warning signs for Home Depot that you should be aware of before investing here.