Yahoo Finance Institutional investors must be pleased after a 3.2% gain last week that adds to Texas Instruments Incorporated's (NASDAQ:TXN) one-year returns
Key Insights
Institutions' substantial holdings in Texas Instruments implies that they have significant influence over the company's share price
The top 20 shareholders own 50% of the company
Analyst forecasts along with ownership data serve to give a strong idea about prospects for a business
To get a sense of who is truly in control of Texas Instruments Incorporated (NASDAQ:TXN), 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 89% ownership. That is, the group stands to benefit the most if the stock rises (or lose the most if there is a downturn).
And things are looking up for institutional investors after the company gained US$4.9b in market cap last week. The gains from last week would have further boosted the one-year return to shareholders which currently stand at 2.0%.
In the chart below, we zoom in on the different ownership groups of Texas Instruments.
View our latest analysis for Texas Instruments
What Does The Institutional Ownership Tell Us About Texas Instruments?
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 Texas Instruments 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 Texas Instruments' historic earnings and revenue below, but keep in mind there's always more to the story.
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 Texas Instruments. Looking at our data, we can see that the largest shareholder is The Vanguard Group, Inc. with 9.6% of shares outstanding. With 8.7% and 4.2% of the shares outstanding respectively, BlackRock, Inc. and State Street Global Advisors, Inc. are the second and third largest shareholders.
After doing some more digging, we found that the top 20 have the combined ownership of 50% in the company, suggesting that no single shareholder has significant control over the company.
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 Texas Instruments
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.
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 Texas Instruments Incorporated. Being so large, we would not expect insiders to own a large proportion of the stock. Collectively, they own US$196m of stock. It is always good to see at least some insider ownership, but it might be worth checking if those insiders have been selling.
General Public Ownership
The general public-- including retail investors -- own 11% stake in the company, and hence can't easily be ignored. While this group can't necessarily call the shots, it can certainly have a real influence on how the company is run.
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. Take risks for example - Texas Instruments has 2 warning signs (and 1 which is potentially serious) we think you should know about.
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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