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In the wake of Community Bank System, Inc.'s (NYSE:CBU) latest US$118m market cap drop, institutional owners may be forced to take severe actions

Key Insights

  • Significantly high institutional ownership implies Community Bank System's stock price is sensitive to their trading actions

  • The top 8 shareholders own 50% of the company

  • Insiders have sold recently

To get a sense of who is truly in control of Community Bank System, Inc. (NYSE:CBU), it is important to understand the ownership structure of the business. The group holding the most number of shares in the company, around 75% to be precise, is institutions. In other words, the group stands to gain the most (or lose the most) from their investment into the company.

And institutional investors saw their holdings value drop by 5.0% last week. The recent loss, which adds to a one-year loss of 6.0% for stockholders, may not sit well with this group of investors. Also referred to as "smart money", institutions have a lot of sway over how a stock's price moves. Hence, if weakness in Community Bank System's share price continues, institutional investors may feel compelled to sell the stock, which might not be ideal for individual investors.

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Let's delve deeper into each type of owner of Community Bank System, beginning with the chart below.

View our latest analysis for Community Bank System

ownership-breakdown
ownership-breakdown

What Does The Institutional Ownership Tell Us About Community Bank System?

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 Community Bank System 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. 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 Community Bank System's historic earnings and revenue below, but keep in mind there's always more to the story.

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

Institutional investors own over 50% of the company, so together than can probably strongly influence board decisions. We note that hedge funds don't have a meaningful investment in Community Bank System. Our data shows that BlackRock, Inc. is the largest shareholder with 14% of shares outstanding. For context, the second largest shareholder holds about 13% of the shares outstanding, followed by an ownership of 7.3% by the third-largest shareholder.

On further inspection, we found that more than half the company's shares are owned by the top 8 shareholders, suggesting that the interests of the larger shareholders are balanced out to an extent by the smaller ones.

Researching institutional ownership is a good way to gauge and filter a stock's expected performance. The same can be achieved by studying analyst sentiments. Quite a few analysts cover the stock, so you could look into forecast growth quite easily.

Insider Ownership Of Community Bank System

While the precise definition of an insider can be subjective, almost everyone considers board members to be insiders. 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.

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.

We can see that insiders own shares in Community Bank System, Inc.. It is a pretty big company, so it is generally a positive to see some potentially meaningful alignment. In this case, they own around US$28m worth of shares (at current prices). Most would say this shows 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 23% 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:

While it is well worth considering the different groups that own a company, there are other factors that are even more important.

I like to dive deeper into how a company has performed in the past. You can find historic revenue and earnings in this detailed graph.

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.