Eaton Corporation plc's (NYSE:ETN) large institutional owners must be happy as stock continues to impress, up 3.4% over the past week

Key Insights

• Institutions' substantial holdings in Eaton implies that they have significant influence over the company's share price
• The top 22 shareholders own 50% of the company
• Recent sales by insiders

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A look at the shareholders of Eaton Corporation plc (NYSE:ETN) can tell us which group is most powerful. The group holding the most number of shares in the company, around 85% to be precise, is institutions. That is, the group stands to benefit the most if the stock rises (or lose the most if there is a downturn).

And as as result, institutional investors reaped the most rewards after the company's stock price gained 3.4% last week. The one-year return on investment is currently 15% and last week's gain would have been more than welcomed.

In the chart below, we zoom in on the different ownership groups of Eaton.

View our latest analysis for Eaton

What Does The Institutional Ownership Tell Us About Eaton?

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.

Eaton 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. 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 Eaton's historic earnings and revenue below, but keep in mind there's always more to the story.

Investors should note that institutions actually own more than half the company, so they can collectively wield significant power. Eaton is not owned by hedge funds. The Vanguard Group, Inc. is currently the company's largest shareholder with 9.6% of shares outstanding. Meanwhile, the second and third largest shareholders, hold 7.6% and 4.3%, of the shares outstanding, respectively.

After doing some more digging, we found that the top 22 have the combined ownership of 50% in the company, suggesting that no single shareholder has significant control over the company.

Researching institutional ownership is a good way to gauge and filter a stock's expected performance. The same can be achieved by studying analyst sentiments. 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 Eaton

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. Management ultimately answers to the board. However, it is not uncommon for managers to be executive board members, especially if they are a founder or the CEO.

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 data suggests that insiders own under 1% of Eaton Corporation plc in their own names. Being so large, we would not expect insiders to own a large proportion of the stock. Collectively, they own US$274m of stock. It is good to see board members owning shares, but it might be worth checking if those insiders have been buying.

General Public Ownership

The general public-- including retail investors -- own 14% stake in the company, and hence can't easily be ignored. While this group can't necessarily call the shots, it can certainly have a real influence on how the company is run.

Next Steps:

It's always worth thinking about the different groups who own shares in a company. But to understand Eaton better, we need to consider many other factors. Be aware that Eaton is showing 2 warning signs in our investment analysis , you should know about...

If you would prefer discover what analysts are predicting in terms of future growth, do not miss this free report on analyst forecasts.

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.