Could The Sherwin-Williams Company’s (NYSE:SHW) Investor Composition Influence The Stock Price?

Want to participate in a short research study? Help shape the future of investing tools and you could win a $250 gift card!

The big shareholder groups in The Sherwin-Williams Company (NYSE:SHW) have power over the company. Institutions often own shares in more established companies, while it’s not unusual to see insiders own a fair bit of smaller companies. Companies that used to be publicly owned tend to have lower insider ownership.

With a market capitalization of US$43b, Sherwin-Williams is rather large. We’d expect to see institutional investors on the register. Companies of this size are usually well known to retail investors, too. In the chart below below, we can see that institutional investors have bought into the company. Let’s take a closer look to see what the different types of shareholder can tell us about SHW.

View our latest analysis for Sherwin-Williams

NYSE:SHW Ownership Summary, July 13th 2019
NYSE:SHW Ownership Summary, July 13th 2019

What Does The Institutional Ownership Tell Us About Sherwin-Williams?

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 79% of Sherwin-Williams. 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. 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 Sherwin-Williams’s historic earnings and revenue, below, but keep in mind there’s always more to the story.

NYSE:SHW Income Statement, July 13th 2019
NYSE:SHW Income Statement, July 13th 2019

Since institutional investors own more than half the issued stock, the board will likely have to pay attention to their preferences. Sherwin-Williams is not owned by hedge funds. Quite a few analysts cover the stock, so you could look into forecast growth quite easily.

Insider Ownership Of Sherwin-Williams

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.

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 most recent data indicates that insiders own less than 1% of The Sherwin-Williams Company. As it is a large company, we’d only expect insiders to own a small percentage of it. But it’s worth noting that they own US$162m worth of shares. 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

The general public, with a 10% 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:

It’s always worth thinking about the different groups who own shares in a company. But to understand Sherwin-Williams better, we need to consider many other factors.

Many find it useful to take an in depth look at how a company has performed in the past. You can access this detailed graph of past earnings, revenue and cash flow .

Ultimately the future is most important. You can access this free report on analyst forecasts for the company.

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.

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.

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. Thank you for reading.