Are Institutions Heavily Invested In Illinois Tool Works Inc.'s (NYSE:ITW) Shares?

By
Simply Wall St
Published
March 13, 2021
NYSE:ITW

The big shareholder groups in Illinois Tool Works Inc. (NYSE:ITW) have power over the company. Insiders often own a large chunk of younger, smaller, companies while huge companies tend to have institutions as shareholders. We also tend to see lower insider ownership in companies that were previously publicly owned.

Illinois Tool Works has a market capitalization of US$67b, so it's too big to fly under the radar. We'd expect to see both institutions and retail investors owning a portion of the company. Our analysis of the ownership of the company, below, shows that institutional investors have bought into the company. Let's delve deeper into each type of owner, to discover more about Illinois Tool Works.

View our latest analysis for Illinois Tool Works

ownership-breakdown
NYSE:ITW Ownership Breakdown March 13th 2021

What Does The Institutional Ownership Tell Us About Illinois Tool Works?

Institutional investors commonly compare their own returns to the returns of a commonly followed index. So they generally do consider buying larger companies that are included in the relevant benchmark index.

Illinois Tool Works already has institutions on the share registry. Indeed, they own a respectable stake in the company. This can indicate that the company has a certain degree of credibility in the investment community. However, it is best to be wary of relying on the supposed validation that comes with institutional investors. They too, get it wrong sometimes. If multiple institutions change their view on a stock at the same time, you could see the share price drop fast. It's therefore worth looking at Illinois Tool Works' earnings history below. Of course, the future is what really matters.

earnings-and-revenue-growth
NYSE:ITW Earnings and Revenue Growth March 13th 2021

Investors should note that institutions actually own more than half the company, so they can collectively wield significant power. Illinois Tool Works is not owned by hedge funds. Our data shows that Briar Hall Management LLC is the largest shareholder with 8.2% of shares outstanding. For context, the second largest shareholder holds about 8.0% of the shares outstanding, followed by an ownership of 6.9% by the third-largest shareholder.

After doing some more digging, we found that the top 14 have the combined ownership of 50% in the company, suggesting that no single shareholder has significant control over the company.

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. Quite a few analysts cover the stock, so you could look into forecast growth quite easily.

Insider Ownership Of Illinois Tool Works

While the precise definition of an insider can be subjective, almost everyone considers board members to be insiders. 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 most recent data indicates that insiders own less than 1% of Illinois Tool Works Inc.. As it is a large company, we'd only expect insiders to own a small percentage of it. But it's worth noting that they own US$248m worth of shares. Arguably recent buying and selling is just as important to consider. You can click here to see if insiders have been buying or selling.

General Public Ownership

The general public, with a 20% stake in the company, will not 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:

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. Take risks for example - Illinois Tool Works has 1 warning sign we think you should be aware of.

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. 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.
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