Institutions' substantial holdings in Yum China Holdings implies that they have significant influence over the company's share price
A total of 21 investors have a majority stake in the company with 51% ownership
Using data from analyst forecasts alongside ownership research, one can better assess the future performance of a company
If you want to know who really controls Yum China Holdings, Inc. (NYSE:YUMC), then you'll have to look at the makeup of its share registry. We can see that institutions own the lion's share in the company with 81% ownership. That is, the group stands to benefit the most if the stock rises (or lose the most if there is a downturn).
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. 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 Yum China Holdings.
What Does The Institutional Ownership Tell Us About Yum China Holdings?
Institutions typically measure themselves against a benchmark when reporting to their own investors, so they often become more enthusiastic about a stock once it's included in a major index. We would expect most companies to have some institutions on the register, especially if they are growing.
Yum China Holdings 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. 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 China Holdings' historic earnings and revenue below, but keep in mind there's always more to the story.
NYSE:YUMC Earnings and Revenue Growth November 12th 2023
Since institutional investors own more than half the issued stock, the board will likely have to pay attention to their preferences. We note that hedge funds don't have a meaningful investment in Yum China Holdings. Invesco Ltd. is currently the company's largest shareholder with 7.1% of shares outstanding. For context, the second largest shareholder holds about 7.0% of the shares outstanding, followed by an ownership of 4.7% by the third-largest shareholder.
After doing some more digging, we found that the top 21 have the combined ownership of 51% in the company, suggesting that no single shareholder has significant control over the company.
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 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 Yum China Holdings
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. 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 China Holdings, Inc. in their own names. As it is a large company, we'd only expect insiders to own a small percentage of it. But it's worth noting that they own US$37m worth of shares. 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, who are usually individual investors, hold a 19% stake in Yum China Holdings. 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:
I find it very interesting to look at who exactly owns a company. But to truly gain insight, we need to consider other information, too.
If you would prefer discover what analysts are predicting in terms of future growth, do not miss this freereport on analyst forecasts.
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.
