Yahoo Finance Fortinet, Inc.'s (NASDAQ:FTNT) market cap decline of US$2.4b may not have as much of an impact on institutional owners after a year of 2.2% returns
Key Insights
Given the large stake in the stock by institutions, Fortinet's stock price might be vulnerable to their trading decisions
The top 15 shareholders own 50% of the company
Every investor in Fortinet, Inc. (NASDAQ:FTNT) should be aware of the most powerful shareholder groups. And the group that holds the biggest piece of the pie are institutions with 70% ownership. That is, the group stands to benefit the most if the stock rises (or lose the most if there is a downturn).
Losing money on investments is something no shareholder enjoys, least of all institutional investors who saw their holdings value drop by 5.1% last week. Still, the 2.2% one-year gains may have helped mitigate their overall losses. But they would probably be wary of future losses.
In the chart below, we zoom in on the different ownership groups of Fortinet.
Check out our latest analysis for Fortinet
What Does The Institutional Ownership Tell Us About Fortinet?
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 Fortinet 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 Fortinet'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. Fortinet is not owned by hedge funds. The Vanguard Group, Inc. is currently the company's largest shareholder with 8.7% of shares outstanding. With 8.1% and 7.2% of the shares outstanding respectively, Ken Xie and Michael Xie are the second and third largest shareholders. Two of the top three shareholders happen to be Chief Executive Officer and Member of the Board of Directors, respectively. That is, insiders feature higher up in the heirarchy of the company's top 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 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 Fortinet
While the precise definition of an insider can be subjective, almost everyone considers board members to be insiders. 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.
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 insiders maintain a significant holding in Fortinet, Inc.. It has a market capitalization of just US$44b, and insiders have US$6.8b worth of shares in their own names. That's quite significant. Most would be pleased to see the board is investing alongside them. You may wish to access this free chart showing recent trading by insiders.
General Public Ownership
The general public, who are usually individual investors, hold a 15% stake in Fortinet. 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:
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.
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.
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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.
