Huntington Ingalls Industries, Inc.'s (NYSE:HII) market cap decline of US$278m may not have as much of an impact on institutional owners after a year of 6.2% returns

By
Simply Wall St
Published
March 16, 2022
NYSE:HII
Source: Shutterstock

If you want to know who really controls Huntington Ingalls Industries, Inc. (NYSE:HII), then you'll have to look at the makeup of its share registry. We can see that institutions own the lion's share in the company with 88% ownership. Put another way, the group faces the maximum upside potential (or downside risk).

Institutional investors endured the highest losses after the company's market cap fell by US$278m last week. However, the 6.2% one-year return to shareholders might have softened the blow. We would assume however, that they would be on the lookout for weakness in the future.

Let's take a closer look to see what the different types of shareholders can tell us about Huntington Ingalls Industries.

See our latest analysis for Huntington Ingalls Industries

ownership-breakdown
NYSE:HII Ownership Breakdown March 16th 2022

What Does The Institutional Ownership Tell Us About Huntington Ingalls Industries?

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

earnings-and-revenue-growth
NYSE:HII Earnings and Revenue Growth March 16th 2022

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 Huntington Ingalls Industries. Our data shows that The Vanguard Group, Inc. is the largest shareholder with 11% of shares outstanding. In comparison, the second and third largest shareholders hold about 11% and 8.5% of the stock.

A closer look at our ownership figures suggests that the top 12 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. Quite a few analysts cover the stock, so you could look into forecast growth quite easily.

Insider Ownership Of Huntington Ingalls Industries

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.

We can report that insiders do own shares in Huntington Ingalls Industries, Inc.. The insiders have a meaningful stake worth US$166m. Most would say this shows a good 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 10% 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:

It's always worth thinking about the different groups who own shares in a company. But to understand Huntington Ingalls Industries better, we need to consider many other factors. Be aware that Huntington Ingalls Industries is showing 3 warning signs in our investment analysis , you should know about...

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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