If you want to know who really controls Cisco Systems, Inc. (NASDAQ:CSCO), 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 74% ownership. Put another way, the group faces the maximum upside potential (or downside risk).
As a result, institutional investors endured the highest losses last week after market cap fell by US$11b. The recent loss, which adds to a one-year loss of 26% 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. As a result, if the downtrend continues, institutions may face pressures to sell Cisco Systems, which might have negative implications on individual investors.
In the chart below, we zoom in on the different ownership groups of Cisco Systems.
What Does The Institutional Ownership Tell Us About Cisco Systems?
Institutions typically measure themselves against a benchmark when reporting to their own investors, so they often become more enthusiastic about a stock once it's included in a major index. We would expect most companies to have some institutions on the register, especially if they are growing.
We can see that Cisco Systems 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 Cisco Systems' historic earnings and revenue below, but keep in mind there's always more to the story.
Since institutional investors own more than half the issued stock, the board will likely have to pay attention to their preferences. Cisco Systems is not owned by hedge funds. Our data shows that The Vanguard Group, Inc. is the largest shareholder with 9.1% of shares outstanding. BlackRock, Inc. is the second largest shareholder owning 8.6% of common stock, and State Street Global Advisors, Inc. holds about 4.5% of the company stock.
On studying our ownership data, we found that 25 of the top shareholders collectively own less than 50% of the share register, implying that no single individual has a majority interest.
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. 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 Cisco Systems
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. 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 Cisco Systems, Inc. in their own names. As it is a large company, we'd only expect insiders to own a small percentage of it. But it's worth noting that they own US$48m worth of shares. 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, who are usually individual investors, hold a 25% stake in Cisco Systems. While this group can't necessarily call the shots, it can certainly have a real influence on how the company is run.
It's always worth thinking about the different groups who own shares in a company. But to understand Cisco Systems better, we need to consider many other factors.
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.
Ultimately the future is most important. You can access this free report on analyst forecasts for the company.
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.
Join A Paid User Research Session
You’ll receive a US$30 Amazon Gift card for 1 hour of your time while helping us build better investing tools for the individual investors like yourself. Sign up here