What Is The Ownership Structure Like For Northrop Grumman Corporation (NYSE:NOC)?

By
Simply Wall St
Published
December 01, 2020

If you want to know who really controls Northrop Grumman Corporation (NYSE:NOC), then you'll have to look at the makeup of its share registry. Institutions often own shares in more established companies, while it's not unusual to see insiders own a fair bit of smaller companies. We also tend to see lower insider ownership in companies that were previously publicly owned.

Northrop Grumman is a pretty big company. It has a market capitalization of US$51b. Normally institutions would own a significant portion of a company this size. Our analysis of the ownership of the company, below, shows that institutional investors have bought into the company. Let's take a closer look to see what the different types of shareholders can tell us about Northrop Grumman.

Check out our latest analysis for Northrop Grumman

NYSE:NOC Ownership Breakdown December 1st 2020

What Does The Institutional Ownership Tell Us About Northrop Grumman?

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.

As you can see, institutional investors have a fair amount of stake in Northrop Grumman. 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. It is not uncommon to see a big share price drop if two large institutional investors try to sell out of a stock at the same time. So it is worth checking the past earnings trajectory of Northrop Grumman, (below). Of course, keep in mind that there are other factors to consider, too.

NYSE:NOC Earnings and Revenue Growth December 1st 2020

Investors should note that institutions actually own more than half the company, so they can collectively wield significant power. Hedge funds don't have many shares in Northrop Grumman. Capital Research and Management Company is currently the largest shareholder, with 13% of shares outstanding. With 9.8% and 7.6% of the shares outstanding respectively, State Street Global Advisors, Inc. and The Vanguard Group, Inc. are the second and third largest shareholders.

We also observed that the top 8 shareholders account for more than half of the share register, with a few smaller shareholders to balance the interests of the larger ones to a certain extent.

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 Northrop Grumman

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.

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.

Our most recent data indicates that insiders own less than 1% of Northrop Grumman Corporation. It is a very large company, so it would be surprising to see insiders own a large proportion of the company. Though their holding amounts to less than 1%, we can see that board members collectively own US$190m worth of shares (at current prices). 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, with a 16% stake in the company, will not 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:

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 Northrop Grumman , and understanding them should be part of your investment process.

But ultimately it is the future, not the past, that will determine how well the owners of this business will do. Therefore we think it advisable to take a look at this free report showing whether analysts are predicting a brighter 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. 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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