Yahoo Finance In the wake of Vector Group Ltd.'s (NYSE:VGR) latest US$72m market cap drop, institutional owners may be forced to take severe actions
Key Insights
Given the large stake in the stock by institutions, Vector Group's stock price might be vulnerable to their trading decisions
A total of 8 investors have a majority stake in the company with 51% ownership
Every investor in Vector Group Ltd. (NYSE:VGR) should be aware of the most powerful shareholder groups. And the group that holds the biggest piece of the pie are institutions with 60% ownership. Put another way, the group faces the maximum upside potential (or downside risk).
As a result, institutional investors endured the highest losses last week after market cap fell by US$72m. This set of investors may especially be concerned about the current loss, which adds to a one-year loss of 14% for shareholders. Also referred to as "smart money", institutions have a lot of sway over how a stock's price moves. Hence, if weakness in Vector Group's share price continues, institutional investors may feel compelled to sell the stock, which might not be ideal for individual investors.
In the chart below, we zoom in on the different ownership groups of Vector Group.
Check out our latest analysis for Vector Group
What Does The Institutional Ownership Tell Us About Vector Group?
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.
We can see that Vector Group does have institutional investors; and they hold a good portion of the company's stock. 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 Vector Group's historic earnings and revenue below, but keep in mind there's always more to the story.
Institutional investors own over 50% of the company, so together than can probably strongly influence board decisions. Our data indicates that hedge funds own 5.2% of Vector Group. That worth noting, since hedge funds are often quite active investors, who may try to influence management. Many want to see value creation (and a higher share price) in the short term or medium term. BlackRock, Inc. is currently the largest shareholder, with 14% of shares outstanding. With 11% and 9.4% of the shares outstanding respectively, The Vanguard Group, Inc. and Phillip Frost are the second and third largest shareholders. In addition, we found that Howard Lorber, the CEO has 3.5% of the shares allocated to their name.
We also observed that the top 8 shareholders account for more than half of the share register, with a few smaller shareholders to balance the interests of the larger ones to a certain extent.
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 is some analyst coverage of the stock, but it could still become more well known, with time.
Insider Ownership Of Vector Group
The definition of an insider can differ slightly between different countries, but members of the board of directors always count. Company management run the business, but the CEO will answer to the board, even if he or she is a member of it.
Most consider insider ownership a positive because it can indicate the board is well aligned with other shareholders. However, on some occasions too much power is concentrated within this group.
It seems insiders own a significant proportion of Vector Group Ltd.. Insiders own US$237m worth of shares in the US$1.7b company. That's quite meaningful. It is good to see this level of investment. You can check here to see if those insiders have been buying recently.
General Public Ownership
The general public, who are usually individual investors, hold a 21% stake in Vector Group. 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 Vector Group better, we need to consider many other factors. Take risks for example - Vector Group has 3 warning signs (and 2 which shouldn't be ignored) we think 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.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com
