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Lululemon Athletica Inc. (NASDAQ:LULU) is largely controlled by institutional shareholders who own 86% of the company

Key Insights

  • Significantly high institutional ownership implies Lululemon Athletica's stock price is sensitive to their trading actions

  • A total of 15 investors have a majority stake in the company with 50% ownership

  • Analyst forecasts along with ownership data serve to give a strong idea about prospects for a business

If you want to know who really controls Lululemon Athletica Inc. (NASDAQ:LULU), then you'll have to look at the makeup of its share registry. And the group that holds the biggest piece of the pie are institutions with 86% ownership. That is, the group stands to benefit the most if the stock rises (or lose the most if there is a downturn).

Because institutional owners have a huge pool of resources and liquidity, their investing decisions tend to carry a great deal of weight, especially with individual investors. Therefore, a good portion of institutional money invested in the company is usually a huge vote of confidence on its future.

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Let's delve deeper into each type of owner of Lululemon Athletica, beginning with the chart below.

See our latest analysis for Lululemon Athletica

ownership-breakdown
ownership-breakdown

What Does The Institutional Ownership Tell Us About Lululemon Athletica?

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 Lululemon Athletica. 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 Lululemon Athletica, (below). Of course, keep in mind that there are other factors to consider, too.

earnings-and-revenue-growth
earnings-and-revenue-growth

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 Lululemon Athletica. FMR LLC is currently the largest shareholder, with 14% of shares outstanding. With 5.8% and 5.7% of the shares outstanding respectively, The Vanguard Group, Inc. and BlackRock, Inc. are the second and third largest shareholders.

A closer look at our ownership figures suggests that the top 15 shareholders have a combined ownership of 50% implying that no single shareholder has a majority.

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. 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 Lululemon Athletica

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.

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.

Shareholders would probably be interested to learn that insiders own shares in Lululemon Athletica Inc.. It is a very large company, and board members collectively own US$1.7b worth of shares (at current prices). Most would say this shows a good alignment of interests between shareholders and the board. Still, it might be worth checking if those insiders have been selling.

General Public Ownership

The general public-- including retail investors -- own 10% 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 Lululemon Athletica better, we need to consider many other factors. For instance, we've identified 2 warning signs for Lululemon Athletica (1 makes us a bit uncomfortable) that 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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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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