Institutional investors control 54% of Fortis Inc. (TSE:FTS) and were rewarded last week after stock increased 4.1%

Key Insights

• Significantly high institutional ownership implies Fortis' stock price is sensitive to their trading actions
• A total of 25 investors have a majority stake in the company with 43% ownership
• Recent purchases by insiders

To get a sense of who is truly in control of Fortis Inc. (TSE:FTS), it is important to understand the ownership structure of the business. The group holding the most number of shares in the company, around 54% to be precise, is institutions. Put another way, the group faces the maximum upside potential (or downside risk).

Last week’s 4.1% gain means that institutional investors were on the positive end of the spectrum even as the company has shown strong longer-term trends. The gains from last week would have further boosted the one-year return to shareholders which currently stand at 19%.

Let's delve deeper into each type of owner of Fortis, beginning with the chart below.

Check out our latest analysis for Fortis

What Does The Institutional Ownership Tell Us About Fortis?

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.

Fortis 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 Fortis, (below). Of course, keep in mind that there are other factors to consider, too.

Investors should note that institutions actually own more than half the company, so they can collectively wield significant power. Hedge funds don't have many shares in Fortis. Our data shows that BMO Asset Management Corp. is the largest shareholder with 5.3% of shares outstanding. Fidelity International Ltd is the second largest shareholder owning 4.4% of common stock, and The Vanguard Group, Inc. holds about 4.2% of the company stock.

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. Quite a few analysts cover the stock, so you could look into forecast growth quite easily.

Insider Ownership Of Fortis

While the precise definition of an insider can be subjective, almost everyone considers board members to be insiders. Company management run the business, but the CEO will answer to the board, even if he or she is a member of it.

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 data suggests that insiders own under 1% of Fortis Inc. in their own names. Being so large, we would not expect insiders to own a large proportion of the stock. Collectively, they own CA$32m of stock. 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 45% ownership, the general public, mostly comprising of individual investors, have some degree of sway over Fortis. 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.

Next Steps:

While it is well worth considering the different groups that own a company, there are other factors that are even more important. For instance, we've identified 2 warning signs for Fortis (1 is potentially serious) that you should be aware of.

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.

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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.