Every investor in Fortinet, Inc. (NASDAQ:FTNT) should be aware of the most powerful shareholder groups. Institutions will often hold stock in bigger companies, and we expect to see insiders owning a noticeable percentage of the smaller ones. I generally like to see some degree of insider ownership, even if only a little. As Nassim Nicholas Taleb said, ‘Don’t tell me what you think, tell me what you have in your portfolio.
Fortinet is a pretty big company. It has a market capitalization of US$20b. 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 Fortinet.
What Does The Institutional Ownership Tell Us About Fortinet?
Institutional investors commonly compare their own returns to the returns of a commonly followed index. So they generally do consider buying larger companies that are included in the relevant benchmark index.
Fortinet already has institutions on the share registry. Indeed, they own 74% of the company. 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 Fortinet’s earnings history, below. Of course, the future is what really matters.
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 Fortinet. Looking at our data, we can see that the largest shareholder is The Vanguard Group, Inc. with 10% of shares outstanding. Next, we have Ken Xie and Michael Xie as the second and third largest shareholders, holding 7.3% and 6.9%, of the shares outstanding, respectively. They also hold the title of Chief Executive Officer and Member of the Board of Directors, respectively, suggesting that these insiders have a personal stake in the company.
A closer look at our ownership figures suggests that the top 16 shareholders have a combined ownership of 50% implying that no one share holder 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 plenty of analysts covering the stock, so it might be worth seeing what they are forecasting, too.
Insider Ownership Of Fortinet
While the precise definition of an insider can be subjective, almost everyone considers board members to be insiders. 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.
Insider ownership is positive when it signals leadership are thinking like the true owners of the company. However, high insider ownership can also give immense power to a small group within the company. This can be negative in some circumstances.
Our information suggests that insiders maintain a significant holding in Fortinet, Inc.. It has a market capitalization of just US$20b, and insiders have US$2.9b worth of shares in their own names. That’s quite significant. Most would say this shows a good degree of alignment with shareholders, especially in a company of this size. You can click here to see if those insiders have been buying or selling.
General Public Ownership
With a 12% ownership, the general public have some degree of sway over FTNT. While this size of ownership may not be enough to sway a policy decision in their favour, they can still make a collective impact on company policies.
It’s always worth thinking about the different groups who own shares in a company. But to understand Fortinet better, we need to consider many other factors. Consider risks, for instance. Every company has them, and we’ve spotted 1 warning sign for Fortinet you should know about.
But ultimately it is the future, not the past, that will determine how well the owners of this business will do. Therefore we think it advisable to take a look at this free report showing whether analysts are predicting a brighter 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 email@example.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.
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. Thank you for reading.