Yahoo Finance CVS Health Corporation's (NYSE:CVS) recent 3.6% pullback adds to one-year year losses, institutional owners may take drastic measures
Key Insights
Significantly high institutional ownership implies CVS Health's stock price is sensitive to their trading actions
The top 25 shareholders own 45% of the company
Every investor in CVS Health Corporation (NYSE:CVS) should be aware of the most powerful shareholder groups. With 81% stake, institutions possess the maximum shares in the company. Put another way, the group faces the maximum upside potential (or downside risk).
And so it follows that institutional investors was the group most impacted after the company's market cap fell to US$86b last week after a 3.6% drop in the share price. The recent loss, which adds to a one-year loss of 29% for stockholders, may not sit well with this group of investors. Also referred to as "smart money", institutions have a lot of sway over how a stock's price moves. Hence, if weakness in CVS Health's share price continues, institutional investors may feel compelled to sell the stock, which might not be ideal for individual investors.
Let's delve deeper into each type of owner of CVS Health, beginning with the chart below.
View our latest analysis for CVS Health
What Does The Institutional Ownership Tell Us About CVS Health?
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.
CVS Health 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. 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 CVS Health, (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 CVS Health. The Vanguard Group, Inc. is currently the company's largest shareholder with 9.1% of shares outstanding. Meanwhile, the second and third largest shareholders, hold 7.3% and 4.3%, of the shares outstanding, respectively.
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 CVS Health
While the precise definition of an insider can be subjective, almost everyone considers board members to be insiders. The company management answer to the board and the latter should represent the interests of shareholders. Notably, sometimes top-level managers are on the board themselves.
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 CVS Health Corporation 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$218m worth of shares (at current prices). It is always good to see at least some insider ownership, but it might be worth checking if those insiders have been selling.
General Public Ownership
With a 19% ownership, the general public, mostly comprising of individual investors, have some degree of sway over CVS Health. While this group can't necessarily call the shots, it can certainly have a real influence on how the company is run.
Next Steps:
It's always worth thinking about the different groups who own shares in a company. But to understand CVS Health better, we need to consider many other factors. For example, we've discovered 3 warning signs for CVS Health 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.
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