Given the large stake in the stock by institutions, Southwest Gas Holdings' stock price might be vulnerable to their trading decisions
50% of the business is held by the top 6 shareholders
Analyst forecasts along with ownership data serve to give a strong idea about prospects for a business
A look at the shareholders of Southwest Gas Holdings, Inc. (NYSE:SWX) can tell us which group is most powerful. We can see that institutions own the lion's share in the company with 83% ownership. Put another way, the group faces the maximum upside potential (or downside risk).
Given the vast amount of money and research capacities at their disposal, institutional ownership tends to carry a lot of weight, especially with individual investors. As a result, a sizeable amount of institutional money invested in a firm is generally viewed as a positive attribute.
In the chart below, we zoom in on the different ownership groups of Southwest Gas Holdings.
What Does The Institutional Ownership Tell Us About Southwest Gas Holdings?
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.
As you can see, institutional investors have a fair amount of stake in Southwest Gas Holdings. 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. If multiple institutions change their view on a stock at the same time, you could see the share price drop fast. It's therefore worth looking at Southwest Gas Holdings' earnings history below. Of course, the future is what really matters.
NYSE:SWX Earnings and Revenue Growth January 26th 2025
Investors should note that institutions actually own more than half the company, so they can collectively wield significant power. Our data indicates that hedge funds own 6.6% of Southwest Gas Holdings. That worth noting, since hedge funds are often quite active investors, who may try to influence management. Many want to see value creation (and a higher share price) in the short term or medium term. Icahn Capital LP is currently the largest shareholder, with 13% of shares outstanding. In comparison, the second and third largest shareholders hold about 13% and 9.3% of the stock.
On further inspection, we found that more than half the company's shares are owned by the top 6 shareholders, suggesting that the interests of the larger shareholders are balanced out to an extent by the smaller ones.
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. Quite a few analysts cover the stock, so you could look into forecast growth quite easily.
Insider Ownership Of Southwest Gas Holdings
The definition of an insider can differ slightly between different countries, but members of the board of directors always count. 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.
Our information suggests that Southwest Gas Holdings, Inc. insiders own under 1% of the company. It's a big company, so even a small proportional interest can create alignment between the board and shareholders. In this case insiders own US$24m 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 10% stake in Southwest Gas Holdings. 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.
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.
