Yahoo Lifestyle In the wake of Bristol-Myers Squibb Company's (NYSE:BMY) latest US$4.1b market cap drop, institutional owners may be forced to take severe actions
Key Insights
Given the large stake in the stock by institutions, Bristol-Myers Squibb's stock price might be vulnerable to their trading decisions
49% of the business is held by the top 25 shareholders
Every investor in Bristol-Myers Squibb Company (NYSE:BMY) should be aware of the most powerful shareholder groups. The group holding the most number of shares in the company, around 78% 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).
As a result, institutional investors endured the highest losses last week after market cap fell by US$4.1b. Needless to say, the recent loss which further adds to the one-year loss to shareholders of 11% might not go down well especially with this category of shareholders. Also referred to as "smart money", institutions have a lot of sway over how a stock's price moves. As a result, if the decline continues, institutional investors may be pressured to sell Bristol-Myers Squibb which might hurt individual investors.
Let's take a closer look to see what the different types of shareholders can tell us about Bristol-Myers Squibb.
See our latest analysis for Bristol-Myers Squibb
What Does The Institutional Ownership Tell Us About Bristol-Myers Squibb?
Many institutions measure their performance against an index that approximates the local market. So they usually pay more attention to companies that are included in major indices.
We can see that Bristol-Myers Squibb 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 Bristol-Myers Squibb'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 Bristol-Myers Squibb. The company's largest shareholder is The Vanguard Group, Inc., with ownership of 9.8%. Meanwhile, the second and third largest shareholders, hold 8.3% and 4.4%, of the shares outstanding, respectively.
On studying our ownership data, we found that 25 of the top shareholders collectively own less than 50% of the share register, implying that no single individual has a majority interest.
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 Bristol-Myers Squibb
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.
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 information suggests that Bristol-Myers Squibb Company insiders own under 1% of the company. 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$77m 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-- including retail investors -- own 22% 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:
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. Consider for instance, the ever-present spectre of investment risk. We've identified 2 warning signs with Bristol-Myers Squibb , and understanding them should be part of your investment process.
But ultimately it is the future, not the past, that will determine how well the owners of this business will do. Therefore we think it advisable to take a look at this free report showing whether analysts are predicting a brighter 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.
