In This Article:
Key Insights
-
Given the large stake in the stock by institutions, Cummins' stock price might be vulnerable to their trading decisions
-
A total of 19 investors have a majority stake in the company with 50% ownership
To get a sense of who is truly in control of Cummins Inc. (NYSE:CMI), it is important to understand the ownership structure of the business. The group holding the most number of shares in the company, around 87% 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).
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 Cummins.
Check out our latest analysis for Cummins
What Does The Institutional Ownership Tell Us About Cummins?
Many institutions measure their performance against an index that approximates the local market. So they usually pay more attention to companies that are included in major indices.
We can see that Cummins 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. 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 Cummins, (below). Of course, keep in mind that there are other factors to consider, too.
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 Cummins. The Vanguard Group, Inc. is currently the company's largest shareholder with 12% of shares outstanding. Meanwhile, the second and third largest shareholders, hold 8.9% and 4.6%, of the shares outstanding, respectively.
After doing some more digging, we found that the top 19 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. Quite a few analysts cover the stock, so you could look into forecast growth quite easily.