To get a sense of who is truly in control of Yum! Brands, Inc. (NYSE:YUM), it is important to understand the ownership structure of the business. And the group that holds the biggest piece of the pie are institutions with 80% ownership. In other words, the group stands to gain the most (or lose the most) from their investment into the company.
Because institutional owners have a huge pool of resources and liquidity, their investing decisions tend to carry a great deal of weight, especially with individual investors. Therefore, a good portion of institutional money invested in the company is usually a huge vote of confidence on its future.
In the chart below, we zoom in on the different ownership groups of Yum! Brands.
What Does The Institutional Ownership Tell Us About Yum! Brands?
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.
As you can see, institutional investors have a fair amount of stake in Yum! Brands. 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 Yum! Brands' historic earnings and revenue below, but keep in mind there's always more to the story.
NYSE:YUM Earnings and Revenue Growth February 15th 2023
Investors should note that institutions actually own more than half the company, so they can collectively wield significant power. Yum! Brands is not owned by hedge funds. Capital Research and Management Company is currently the company's largest shareholder with 8.9% of shares outstanding. For context, the second largest shareholder holds about 8.4% of the shares outstanding, followed by an ownership of 8.1% by the third-largest shareholder.
A closer look at our ownership figures suggests that the top 14 shareholders have a combined ownership of 50% implying that no single shareholder has a majority.
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 plenty of analysts covering the stock, so it might be worth seeing what they are forecasting, too.
Insider Ownership Of Yum! Brands
While the precise definition of an insider can be subjective, almost everyone considers board members to be insiders. 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 data suggests that insiders own under 1% of Yum! Brands, Inc. in their own names. It is a very large company, so it would be surprising to see insiders own a large proportion of the company. Though their holding amounts to less than 1%, we can see that board members collectively own US$35m worth of shares (at current prices). In this sort of situation, it can be more interesting to see if those insiders have been buying or selling.
General Public Ownership
The general public-- including retail investors -- own 20% 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.
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.
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