Yahoo Finance Cincinnati Financial Corporation's (NASDAQ:CINF) high institutional ownership speaks for itself as stock continues to impress, up 3.3% over last week
Key Insights
Given the large stake in the stock by institutions, Cincinnati Financial's stock price might be vulnerable to their trading decisions
A total of 25 investors have a majority stake in the company with 47% ownership
Analyst forecasts along with ownership data serve to give a strong idea about prospects for a business
A look at the shareholders of Cincinnati Financial Corporation (NASDAQ:CINF) can tell us which group is most powerful. The group holding the most number of shares in the company, around 66% to be precise, is institutions. In other words, the group stands to gain the most (or lose the most) from their investment into the company.
Last week’s 3.3% gain means that institutional investors were on the positive end of the spectrum even as the company has shown strong longer-term trends. The one-year return on investment is currently 20% and last week's gain would have been more than welcomed.
Let's delve deeper into each type of owner of Cincinnati Financial, beginning with the chart below.
Check out our latest analysis for Cincinnati Financial
What Does The Institutional Ownership Tell Us About Cincinnati Financial?
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.
We can see that Cincinnati Financial 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. 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 Cincinnati Financial's historic earnings and revenue below, but keep in mind there's always more to the story.
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 Cincinnati Financial. The Vanguard Group, Inc. is currently the largest shareholder, with 12% of shares outstanding. For context, the second largest shareholder holds about 7.8% of the shares outstanding, followed by an ownership of 6.2% by the third-largest shareholder.
A deeper look at our ownership data shows that the top 25 shareholders collectively hold less than half of the register, suggesting a large group of small holders where no single shareholder has a majority.
While it makes sense to study institutional ownership data for a company, it also makes sense to study analyst sentiments to know which way the wind is blowing. 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 Cincinnati Financial
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. 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.
We can see that insiders own shares in Cincinnati Financial Corporation. Insiders own US$356m worth of shares (at current prices). we sometimes take an interest in whether they have been buying or selling.
General Public Ownership
With a 32% ownership, the general public, mostly comprising of individual investors, have some degree of sway over Cincinnati Financial. 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:
It's always worth thinking about the different groups who own shares in a company. But to understand Cincinnati Financial better, we need to consider many other factors. For example, we've discovered 1 warning sign for Cincinnati Financial that you should be aware of before investing here.
If you are like me, you may want to think about whether this company will grow or shrink. Luckily, you can check this free report showing analyst forecasts for its future.
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.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.
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.
