Institutional investors have a lot riding on Graham Holdings Company (NYSE:GHC) with 59% ownership

Key Insights

• Given the large stake in the stock by institutions, Graham Holdings' stock price might be vulnerable to their trading decisions
• 53% of the business is held by the top 7 shareholders
• Insiders have been buying lately

To get a sense of who is truly in control of Graham Holdings Company (NYSE:GHC), it is important to understand the ownership structure of the business. We can see that institutions own the lion's share in the company with 59% ownership. That is, the group stands to benefit the most if the stock rises (or lose the most if there is a downturn).

And things are looking up for institutional investors after the company gained US$147m in market cap last week. The one-year return on investment is currently 40% and last week's gain would have been more than welcomed.

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

View our latest analysis for Graham Holdings

What Does The Institutional Ownership Tell Us About Graham Holdings?

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.

We can see that Graham Holdings does have institutional investors; and they hold a good portion of the company's stock. 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. 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 Graham Holdings' earnings history below. Of course, the future is what really matters.

Investors should note that institutions actually own more than half the company, so they can collectively wield significant power. It looks like hedge funds own 5.0% of Graham Holdings shares. That worth noting, since hedge funds are often quite active investors, who may try to influence management. Many want to see value creation (and a higher share price) in the short term or medium term. Donald Graham is currently the largest shareholder, with 13% of shares outstanding. BlackRock, Inc. is the second largest shareholder owning 10% of common stock, and The Vanguard Group, Inc. holds about 8.4% of the company stock. Additionally, the company's CEO Timothy O’Shaughnessy directly holds 6.1% of the total shares outstanding.

On further inspection, we found that more than half the company's shares are owned by the top 7 shareholders, suggesting that the interests of the larger shareholders are balanced out to an extent by the smaller ones.

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. There is a little analyst coverage of the stock, but not much. So there is room for it to gain more coverage.

Insider Ownership Of Graham Holdings

The definition of an insider can differ slightly between different countries, but members of the board of directors always count. 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.

Our information suggests that insiders maintain a significant holding in Graham Holdings Company. It is very interesting to see that insiders have a meaningful US$839m stake in this US$3.6b business. Most would be pleased to see the board is investing alongside them. You may wish to access this free chart showing recent trading by insiders.

General Public Ownership

With a 13% ownership, the general public, mostly comprising of individual investors, have some degree of sway over Graham Holdings. 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. Take risks for example - Graham Holdings has 2 warning signs (and 1 which doesn't sit too well with us) we think you should know about.

Ultimately the future is most important. You can access this free report on analyst forecasts for the company.

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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com