Institutional owners may consider drastic measures as Trinity Industries, Inc.'s (NYSE:TRN) recent US$81m drop adds to long-term losses

Key Insights

• Given the large stake in the stock by institutions, Trinity Industries' stock price might be vulnerable to their trading decisions
• The top 7 shareholders own 53% of the company
• Insiders have been selling lately

Our free stock report includes 5 warning signs investors should be aware of before investing in Trinity Industries. Read for free now.

Every investor in Trinity Industries, Inc. (NYSE:TRN) should be aware of the most powerful shareholder groups. With 87% stake, institutions possess the maximum shares in the company. That is, the group stands to benefit the most if the stock rises (or lose the most if there is a downturn).

And institutional investors endured the highest losses after the company's share price fell by 3.9% last week. Needless to say, the recent loss which further adds to the one-year loss to shareholders of 18% might not go down well especially with this category of shareholders. Also referred to as "smart money", institutions have a lot of sway over how a stock's price moves. As a result, if the decline continues, institutional investors may be pressured to sell Trinity Industries which might hurt individual investors.

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

View our latest analysis for Trinity Industries

What Does The Institutional Ownership Tell Us About Trinity Industries?

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.

We can see that Trinity Industries does have institutional investors; and they hold a good portion of the company's stock. 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. 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 Trinity Industries, (below). Of course, keep in mind that there are other factors to consider, too.

Investors should note that institutions actually own more than half the company, so they can collectively wield significant power. Trinity Industries is not owned by hedge funds. Our data shows that BlackRock, Inc. is the largest shareholder with 16% of shares outstanding. In comparison, the second and third largest shareholders hold about 12% and 6.9% of the stock.

We also observed that the top 7 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 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. While there is some analyst coverage, the company is probably not widely covered. So it could gain more attention, down the track.

Insider Ownership Of Trinity 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.

I generally consider insider ownership to be a good thing. However, on some occasions it makes it more difficult for other shareholders to hold the board accountable for decisions.

We can report that insiders do own shares in Trinity Industries, Inc.. The insiders have a meaningful stake worth US$20m. Most would see this as a real positive. It is good to see this level of investment by insiders. You can check here to see if those insiders have been buying recently.

General Public Ownership

The general public-- including retail investors -- own 12% stake in the company, and hence can't 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:

While it is well worth considering the different groups that own a company, there are other factors that are even more important. To that end, you should learn about the 5 warning signs we've spotted with Trinity Industries (including 2 which are potentially serious) .

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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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.