With 84% ownership in Kratos Defense & Security Solutions, Inc. (NASDAQ:KTOS), institutional investors have a lot riding on the business

Key Insights

• Institutions' substantial holdings in Kratos Defense & Security Solutions implies that they have significant influence over the company's share price
• The top 15 shareholders own 51% of the company
• Insiders have been buying lately

To get a sense of who is truly in control of Kratos Defense & Security Solutions, Inc. (NASDAQ:KTOS), it is important to understand the ownership structure of the business. The group holding the most number of shares in the company, around 84% to be precise, is institutions. In other words, the group stands to gain the most (or lose the most) from their investment into the company.

And as as result, institutional investors reaped the most rewards after the company's stock price gained 3.7% last week. One-year return to shareholders is currently 49% and last week’s gain was the icing on the cake.

Let's take a closer look to see what the different types of shareholders can tell us about Kratos Defense & Security Solutions.

View our latest analysis for Kratos Defense & Security Solutions

What Does The Institutional Ownership Tell Us About Kratos Defense & Security Solutions?

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.

As you can see, institutional investors have a fair amount of stake in Kratos Defense & Security Solutions. 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. 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 Kratos Defense & Security Solutions' historic earnings and revenue below, but keep in mind there's always more to the story.

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 Kratos Defense & Security Solutions. The Vanguard Group, Inc. is currently the largest shareholder, with 9.2% of shares outstanding. BlackRock, Inc. is the second largest shareholder owning 8.5% of common stock, and State Street Global Advisors, Inc. holds about 4.4% of the company stock. In addition, we found that Eric DeMarco, the CEO has 0.7% of the shares allocated to their name.

A closer look at our ownership figures suggests that the top 15 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. There are plenty of analysts covering the stock, so it might be worth seeing what they are forecasting, too.

Insider Ownership Of Kratos Defense & Security Solutions

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.

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.

Shareholders would probably be interested to learn that insiders own shares in Kratos Defense & Security Solutions, 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$77m worth of shares (at current prices). Most would say this shows alignment of interests between shareholders and the board. Still, it might be worth checking if those insiders have been selling.

General Public Ownership

The general public-- including retail investors -- own 14% 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 Kratos Defense & Security Solutions better, we need to consider many other factors. Consider for instance, the ever-present spectre of investment risk. We've identified 1 warning sign with Kratos Defense & Security Solutions , and understanding them should be part of your investment process.

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.