With 86% institutional ownership, Kratos Defense & Security Solutions, Inc. (NASDAQ:KTOS) is a favorite amongst the big guns

Key Insights

• Significantly high institutional ownership implies Kratos Defense & Security Solutions' stock price is sensitive to their trading actions
• A total of 15 investors have a majority stake in the company with 51% ownership
• Recent sales by insiders

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. We can see that institutions own the lion's share in the company with 86% ownership. In other words, the group stands to gain the most (or lose the most) from their investment into the company.

Because institutional owners have a huge pool of resources and liquidity, their investing decisions tend to carry a great deal of weight, especially with individual investors. Therefore, a good portion of institutional money invested in the company is usually a huge vote of confidence on its future.

Let's delve deeper into each type of owner of Kratos Defense & Security Solutions, beginning with the chart below.

Check out 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.

We can see that Kratos Defense & Security Solutions does have institutional investors; and they hold a good portion of the company's stock. 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.

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 Kratos Defense & Security Solutions. Our data shows that The Vanguard Group, Inc. is the largest shareholder with 9.3% of shares outstanding. For context, the second largest shareholder holds about 8.6% of the shares outstanding, followed by an ownership of 3.9% by the third-largest shareholder. In addition, we found that Eric DeMarco, the CEO has 0.9% of the shares allocated to their name.

Looking at the shareholder registry, we can see that 51% of the ownership is controlled by the top 15 shareholders, meaning that no single shareholder has a majority interest in the ownership.

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 a reasonable number of analysts covering the stock, so it might be useful to find out their aggregate view on the future.

Insider Ownership Of Kratos Defense & Security Solutions

While the precise definition of an insider can be subjective, almost everyone considers board members to be insiders. 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.

Shareholders would probably be interested to learn that insiders own shares in Kratos Defense & Security Solutions, Inc.. This is a big company, so it is good to see this level of alignment. Insiders own US$120m 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 12% ownership, the general public, mostly comprising of individual investors, have some degree of sway over Kratos Defense & Security Solutions. 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. 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.

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.