Cummins Inc. (NYSE:CMI) is a favorite amongst institutional investors who own 87%

Key Insights

• Institutions' substantial holdings in Cummins implies that they have significant influence over the company's share price
• A total of 22 investors have a majority stake in the company with 51% ownership
• Insiders have bought recently

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Every investor in Cummins Inc. (NYSE:CMI) should be aware of the most powerful shareholder groups. The group holding the most number of shares in the company, around 87% 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.

Since institutional have access to huge amounts of capital, their market moves tend to receive a lot of scrutiny by retail or 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 take a closer look to see what the different types of shareholders can tell us about Cummins.

View our latest analysis for Cummins

What Does The Institutional Ownership Tell Us About Cummins?

Many institutions measure their performance against an index that approximates the local market. So they usually pay more attention to companies that are included in major indices.

As you can see, institutional investors have a fair amount of stake in Cummins. 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 Cummins' 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. Cummins is not owned by hedge funds. The company's largest shareholder is The Vanguard Group, Inc., with ownership of 13%. For context, the second largest shareholder holds about 9.1% of the shares outstanding, followed by an ownership of 4.7% by the third-largest shareholder.

A closer look at our ownership figures suggests that the top 22 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 Cummins

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.

Most consider insider ownership a positive because it can indicate the board is well aligned with other shareholders. However, on some occasions too much power is concentrated within this group.

Our information suggests that Cummins Inc. insiders own under 1% of the company. Being so large, we would not expect insiders to own a large proportion of the stock. Collectively, they own US$202m of stock. In this sort of situation, it can be more interesting to see if those insiders have been buying or selling.

General Public Ownership

The general public, who are usually individual investors, hold a 12% stake in Cummins. 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 Cummins better, we need to consider many other factors. For example, we've discovered 2 warning signs for Cummins (1 is potentially serious!) that you should be aware of before investing here.

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.