Institutional investors may overlook The J. M. Smucker Company’s (NYSE:SJM) recent US$668m market cap drop as long-term gains remain positive
Key Insights
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Given the large stake in the stock by institutions, J. M. Smucker’s stock price might be vulnerable to their trading decisions
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50% of the business is held by the top 22 shareholders
To get a sense of who is truly in control of The J. M. Smucker Company (NYSE:SJM), it is important to understand the ownership structure of the business. The group holding the most number of shares in the company, around 79% 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).
Losing money on investments is something no shareholder enjoys, least of all institutional investors who saw their holdings value drop by 4.0% last week. However, the 25% one-year return to shareholders might have softened the blow. But they would probably be wary of future losses.
Let’s take a closer look to see what the different types of shareholders can tell us about J. M. Smucker.
View our latest analysis for J. M. Smucker
What Does The Institutional Ownership Tell Us About J. M. Smucker?
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.
J. M. Smucker 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. 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 J. M. Smucker’s earnings history below. Of course, the future is what really matters.
Institutional investors own over 50% of the company, so together than can probably strongly influence board decisions. J. M. Smucker is not owned by hedge funds. Our data shows that The Vanguard Group, Inc. is the largest shareholder with 13% of shares outstanding. For context, the second largest shareholder holds about 8.8% of the shares outstanding, followed by an ownership of 6.5% by the third-largest shareholder.
After doing some more digging, we found that the top 22 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. 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 J. M. Smucker
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.
Shareholders would probably be interested to learn that insiders own shares in The J. M. Smucker Company. Insiders own US$502m worth of shares (at current prices). we sometimes take an interest in whether they have been buying or selling.
General Public Ownership
The general public– including retail investors — own 18% stake in the company, and hence can’t easily be ignored. 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.
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. Consider risks, for instance. Every company has them, and we’ve spotted 2 warning signs for J. M. Smucker you should know about.
If you would prefer discover what analysts are predicting in terms of future growth, do not miss this free report 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.
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