Orrstown Financial Services, Inc.'s (NASDAQ:ORRF) high institutional ownership speaks for itself as stock continues to impress, up 12% over last week

Key Insights

• Given the large stake in the stock by institutions, Orrstown Financial Services' stock price might be vulnerable to their trading decisions
• 46% of the business is held by the top 25 shareholders
• Analyst forecasts along with ownership data serve to give a strong idea about prospects for a business

Every investor in Orrstown Financial Services, Inc. (NASDAQ:ORRF) should be aware of the most powerful shareholder groups. The group holding the most number of shares in the company, around 48% to be precise, is institutions. Put another way, the group faces the maximum upside potential (or downside risk).

And things are looking up for institutional investors after the company gained US$33m in market cap last week. One-year return to shareholders is currently 52% and last week’s gain was the icing on the cake.

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

View our latest analysis for Orrstown Financial Services

What Does The Institutional Ownership Tell Us About Orrstown Financial Services?

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.

We can see that Orrstown Financial Services does have institutional investors; and they hold a good portion of the company's stock. 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. 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 Orrstown Financial Services' historic earnings and revenue below, but keep in mind there's always more to the story.

Hedge funds don't have many shares in Orrstown Financial Services. Looking at our data, we can see that the largest shareholder is BlackRock, Inc. with 6.9% of shares outstanding. Meanwhile, the second and third largest shareholders, hold 5.1% and 4.6%, of the shares outstanding, respectively. Furthermore, CEO Thomas Quinn is the owner of 0.9% of the company's shares.

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

Insider Ownership Of Orrstown Financial Services

The definition of company insiders can be subjective and does vary between jurisdictions. Our data reflects individual insiders, capturing board members at the very least. 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 some shares in Orrstown Financial Services, Inc.. As individuals, the insiders collectively own US$18m worth of the US$293m company. It is good to see some investment by insiders, but it might be worth checking if those insiders have been buying.

General Public Ownership

The general public-- including retail investors -- own 43% stake in the company, and hence can't 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:

I find it very interesting to look at who exactly owns a company. But to truly gain insight, we need to consider other information, too. Be aware that Orrstown Financial Services is showing 1 warning sign in our investment analysis , you should know about...

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.

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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.

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