Positive week for Honda Motor Co., Ltd. (TSE:7267) institutional investors who lost 12% over the past year

Key Insights

• Significantly high institutional ownership implies Honda Motor's stock price is sensitive to their trading actions
• The top 19 shareholders own 51% of the company
• Analyst forecasts along with ownership data serve to give a strong idea about prospects for a business

A look at the shareholders of Honda Motor Co., Ltd. (TSE:7267) can tell us which group is most powerful. And the group that holds the biggest piece of the pie are institutions with 64% ownership. Put another way, the group faces the maximum upside potential (or downside risk).

Last week's JP¥304b market cap gain would probably be appreciated by institutional investors, especially after a year of 12% losses.

In the chart below, we zoom in on the different ownership groups of Honda Motor.

See our latest analysis for Honda Motor

What Does The Institutional Ownership Tell Us About Honda Motor?

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.

As you can see, institutional investors have a fair amount of stake in Honda Motor. This can indicate that the company has a certain degree of credibility in the investment community. However, it is best to be wary of relying on the supposed validation that comes with institutional investors. They too, get it wrong sometimes. 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 Honda Motor, (below). Of course, keep in mind that there are other factors to consider, too.

Institutional investors own over 50% of the company, so together than can probably strongly influence board decisions. Hedge funds don't have many shares in Honda Motor. The company's largest shareholder is BlackRock, Inc., with ownership of 7.7%. Meanwhile, the second and third largest shareholders, hold 6.2% and 4.1%, of the shares outstanding, respectively.

A closer look at our ownership figures suggests that the top 19 shareholders have a combined ownership of 51% implying that no single shareholder has a majority.

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

Insider Ownership Of Honda Motor

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 most recent data indicates that insiders own less than 1% of Honda Motor Co., Ltd.. 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 JP¥1.5b worth of shares. Arguably recent buying and selling is just as important to consider. You can click here to see if insiders have been buying or selling.

General Public Ownership

The general public-- including retail investors -- own 36% stake in the company, and hence can't easily be ignored. 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:

It's always worth thinking about the different groups who own shares in a company. But to understand Honda Motor better, we need to consider many other factors. For instance, we've identified 4 warning signs for Honda Motor (2 don't sit too well with us) 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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.