Yahoo Finance Institutional shareholders may be less affected by Best Buy Co., Inc.'s (NYSE:BBY) pullback last week after a year of 9.5% returns
Key Insights
Given the large stake in the stock by institutions, Best Buy's stock price might be vulnerable to their trading decisions
The top 11 shareholders own 50% of the company
To get a sense of who is truly in control of Best Buy Co., Inc. (NYSE:BBY), it is important to understand the ownership structure of the business. The group holding the most number of shares in the company, around 79% to be precise, is institutions. That is, the group stands to benefit the most if the stock rises (or lose the most if there is a downturn).
Institutional investors endured the highest losses after the company's market cap fell by US$691m last week. However, the 9.5% one-year return to shareholders may have helped lessen their pain. But they would probably be wary of future losses.
Let's delve deeper into each type of owner of Best Buy, beginning with the chart below.
View our latest analysis for Best Buy
What Does The Institutional Ownership Tell Us About Best Buy?
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.
Best Buy already has institutions on the share registry. Indeed, they own a respectable stake in the company. 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 Best Buy's 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. We note that hedge funds don't have a meaningful investment in Best Buy. The company's largest shareholder is The Vanguard Group, Inc., with ownership of 11%. Meanwhile, the second and third largest shareholders, hold 10% and 8.7%, of the shares outstanding, respectively. Richard Schulze, who is the second-largest shareholder, also happens to hold the title of Top Key Executive.
After doing some more digging, we found that the top 11 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. 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 Best Buy
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 information suggests that insiders maintain a significant holding in Best Buy Co., Inc.. It is very interesting to see that insiders have a meaningful US$1.9b stake in this US$18b business. 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-- including retail investors -- own 11% 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 Best Buy better, we need to consider many other factors. Take risks for example - Best Buy has 2 warning signs we think you should be aware of.
But ultimately it is the future, not the past, that will determine how well the owners of this business will do. Therefore we think it advisable to take a look at this free report showing whether analysts are predicting a brighter 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.
