Could The Gilead Sciences, Inc. (NASDAQ:GILD) Ownership Structure Tell Us Something Useful?

Every investor in Gilead Sciences, Inc. (NASDAQ:GILD) should be aware of the most powerful shareholder groups. Insiders often own a large chunk of younger, smaller, companies while huge companies tend to have institutions as shareholders. We also tend to see lower insider ownership in companies that were previously publicly owned.

Gilead Sciences is a pretty big company. It has a market capitalization of US$85b. Normally institutions would own a significant portion of a company this size. In the chart below, we can see that institutional investors have bought into the company. We can zoom in on the different ownership groups, to learn more about Gilead Sciences.

View our latest analysis for Gilead Sciences

NasdaqGS:GILD Ownership Summary, February 20th 2020
NasdaqGS:GILD Ownership Summary, February 20th 2020

What Does The Institutional Ownership Tell Us About Gilead Sciences?

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.

As you can see, institutional investors own 82% of Gilead Sciences. This suggests some credibility amongst professional investors. But we can’t rely on that fact alone, since institutions make bad investments sometimes, just like everyone does. 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 Gilead Sciences’s earnings history, below. Of course, the future is what really matters.

NasdaqGS:GILD Income Statement, February 20th 2020
NasdaqGS:GILD Income Statement, February 20th 2020

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 Gilead Sciences. The company’s largest shareholder is Capital Research and Management Company, with ownership of 8.7%, The second and third largest shareholders are BlackRock, Inc. and The Vanguard Group, Inc., holding 8.4% and 8.2%, respectively.

On studying our ownership data, we found that 25 of the top shareholders collectively own less than 50% of the share register, implying that no single individual has a majority interest.

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 plenty of analysts covering the stock, so it might be worth seeing what they are forecasting, too.

Insider Ownership Of Gilead Sciences

The definition of an insider can differ slightly between different countries, but members of the board of directors always count. 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.

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.

Our data suggests that insiders own under 1% of Gilead Sciences, Inc. in their own names. Being so large, we would not expect insiders to own a large proportion of the stock. Collectively, they own US$169m of stock. 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, with a 17% stake in the company, will not 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. Take risks, for example – Gilead Sciences has 3 warning signs (and 1 which is significant) we think you should know about.

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.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned.

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