Yahoo Finance A great week that adds to Principal Financial Group, Inc.'s (NASDAQ:PFG) one-year returns, institutional investors who own 74% must be happy
Key Insights
Given the large stake in the stock by institutions, Principal Financial Group's stock price might be vulnerable to their trading decisions
A total of 11 investors have a majority stake in the company with 50% ownership
Ownership research along with analyst forecasts data help provide a good understanding of opportunities in a stock
To get a sense of who is truly in control of Principal Financial Group, Inc. (NASDAQ:PFG), it is important to understand the ownership structure of the business. We can see that institutions own the lion's share in the company with 74% ownership. That is, the group stands to benefit the most if the stock rises (or lose the most if there is a downturn).
And last week, institutional investors ended up benefitting the most after the company hit US$17b in market cap. The one-year return on investment is currently 4.3% and last week's gain would have been more than welcomed.
In the chart below, we zoom in on the different ownership groups of Principal Financial Group.
View our latest analysis for Principal Financial Group
What Does The Institutional Ownership Tell Us About Principal Financial Group?
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.
As you can see, institutional investors have a fair amount of stake in Principal Financial Group. 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 Principal Financial Group, (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. Principal Financial Group is not owned by hedge funds. Looking at our data, we can see that the largest shareholder is The Vanguard Group, Inc. with 12% of shares outstanding. Meanwhile, the second and third largest shareholders, hold 8.8% and 7.5%, of the shares outstanding, respectively.
Looking at the shareholder registry, we can see that 50% of the ownership is controlled by the top 11 shareholders, meaning that no single shareholder has a majority interest in the ownership.
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. Quite a few analysts cover the stock, so you could look into forecast growth quite easily.
Insider Ownership Of Principal Financial Group
The definition of an insider can differ slightly between different countries, but members of the board of directors always count. The company management answer to the board and the latter should represent the interests of shareholders. Notably, sometimes top-level managers are on the board themselves.
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 data suggests that insiders own under 1% of Principal Financial Group, 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$62m 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-- including retail investors -- own 25% stake in the company, and hence can't easily be ignored. This size of ownership, while considerable, may not be enough to change company policy if the decision is not in sync with other large shareholders.
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 Principal Financial Group you should be aware of.
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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