Given the large stake in the stock by institutions, Baker Hughes' stock price might be vulnerable to their trading decisions
52% of the business is held by the top 9 shareholders
Using data from analyst forecasts alongside ownership research, one can better assess the future performance of a company
Every investor in Baker Hughes Company (NASDAQ:BKR) should be aware of the most powerful shareholder groups. The group holding the most number of shares in the company, around 85% to be precise, is institutions. Put another way, the group faces the maximum upside potential (or downside risk).
Last week’s 3.3% gain means that institutional investors were on the positive end of the spectrum even as the company has shown strong longer-term trends. The gains from last week would have further boosted the one-year return to shareholders which currently stand at 56%.
In the chart below, we zoom in on the different ownership groups of Baker Hughes.
NasdaqGS:BKR Ownership Breakdown October 14th 2023
What Does The Institutional Ownership Tell Us About Baker Hughes?
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.
Baker Hughes already has institutions on the share registry. Indeed, they own a respectable stake in the company. This implies the analysts working for those institutions have looked at the stock and they like it. But just like anyone else, they could be wrong. 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 Baker Hughes, (below). Of course, keep in mind that there are other factors to consider, too.
NasdaqGS:BKR Earnings and Revenue Growth October 14th 2023
Institutional investors own over 50% of the company, so together than can probably strongly influence board decisions. Baker Hughes is not owned by hedge funds. The Vanguard Group, Inc. is currently the largest shareholder, with 12% of shares outstanding. Meanwhile, the second and third largest shareholders, hold 9.4% and 6.6%, of the shares outstanding, respectively.
We did some more digging and found that 9 of the top shareholders account for roughly 52% of the register, implying that along with larger shareholders, there are a few smaller shareholders, thereby balancing out each others interests somewhat.
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 plenty of analysts covering the stock, so it might be worth seeing what they are forecasting, too.
Insider Ownership Of Baker Hughes
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.
Most consider insider ownership a positive because it can indicate the board is well aligned with other shareholders. However, on some occasions too much power is concentrated within this group.
Our data suggests that insiders own under 1% of Baker Hughes Company in their own names. Being so large, we would not expect insiders to own a large proportion of the stock. Collectively, they own US$48m of stock. Arguably recent buying and selling is just as important to consider. You can click here to see if insiders have been buying or selling.
General Public Ownership
The general public, who are usually individual investors, hold a 11% stake in Baker Hughes. 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.
Public Company Ownership
We can see that public companies hold 4.4% of the Baker Hughes shares on issue. It's hard to say for sure but this suggests they have entwined business interests. This might be a strategic stake, so it's worth watching this space for changes in ownership.
Next Steps:
While it is well worth considering the different groups that own a company, there are other factors that are even more important. Case in point: We've spotted 1 warning sign for Baker Hughes you should be aware of.
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.
