In the wake of Heartland Financial USA, Inc.'s (NASDAQ:HTLF) latest US$56m market cap drop, institutional owners may be forced to take severe actions

Key Insights

• Significantly high institutional ownership implies Heartland Financial USA's stock price is sensitive to their trading actions
• 51% of the business is held by the top 12 shareholders
• Recent purchases by insiders

Every investor in Heartland Financial USA, Inc. (NASDAQ:HTLF) should be aware of the most powerful shareholder groups. And the group that holds the biggest piece of the pie are institutions with 70% ownership. That is, the group stands to benefit the most if the stock rises (or lose the most if there is a downturn).

And institutional investors endured the highest losses after the company's share price fell by 4.6% last week. The recent loss, which adds to a one-year loss of 35% for stockholders, may not sit well with this group of investors. Also referred to as "smart money", institutions have a lot of sway over how a stock's price moves. Hence, if weakness in Heartland Financial USA's share price continues, institutional investors may feel compelled to sell the stock, which might not be ideal for individual investors.

Let's take a closer look to see what the different types of shareholders can tell us about Heartland Financial USA.

See our latest analysis for Heartland Financial USA

What Does The Institutional Ownership Tell Us About Heartland Financial USA?

Institutions typically measure themselves against a benchmark when reporting to their own investors, so they often become more enthusiastic about a stock once it's included in a major index. We would expect most companies to have some institutions on the register, especially if they are growing.

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

Since institutional investors own more than half the issued stock, the board will likely have to pay attention to their preferences. Hedge funds don't have many shares in Heartland Financial USA. The company's largest shareholder is BlackRock, Inc., with ownership of 13%. With 7.6% and 7.2% of the shares outstanding respectively, EARNEST Partners, LLC and The Vanguard Group, Inc. are the second and third largest shareholders.

A closer look at our ownership figures suggests that the top 12 shareholders have a combined ownership of 51% implying that no single shareholder 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. Quite a few analysts cover the stock, so you could look into forecast growth quite easily.

Insider Ownership Of Heartland Financial USA

The definition of an insider can differ slightly between different countries, but members of the board of directors always count. The company management answer to the board and the latter should represent the interests of shareholders. Notably, sometimes top-level managers are on the board themselves.

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.

We can report that insiders do own shares in Heartland Financial USA, Inc.. It is a pretty big company, so it is generally a positive to see some potentially meaningful alignment. In this case, they own around US$109m worth of shares (at current prices). It is good to see this level of investment by insiders. You can check here to see if those insiders have been buying recently.

General Public Ownership

With a 21% ownership, the general public, mostly comprising of individual investors, have some degree of sway over Heartland Financial USA. 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 Heartland Financial USA better, we need to consider many other factors. Take risks for example - Heartland Financial USA has 1 warning sign we think you should be aware of.

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.

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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.