Institutional investors may overlook Federated Hermes, Inc.'s (NYSE:FHI) recent US$142m market cap drop as long-term gains remain positive

Key Insights

• Institutions' substantial holdings in Federated Hermes implies that they have significant influence over the company's share price
• A total of 13 investors have a majority stake in the company with 50% ownership
• Recent sales by insiders

If you want to know who really controls Federated Hermes, Inc. (NYSE:FHI), then you'll have to look at the makeup of its share registry. With 82% 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).

Institutional investors endured the highest losses after the company's market cap fell by US$142m last week. However, the 26% 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.

In the chart below, we zoom in on the different ownership groups of Federated Hermes.

View our latest analysis for Federated Hermes

What Does The Institutional Ownership Tell Us About Federated Hermes?

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 Federated Hermes. 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. 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 Federated Hermes' earnings history below. Of course, the future is what really matters.

Since institutional investors own more than half the issued stock, the board will likely have to pay attention to their preferences. Federated Hermes is not owned by hedge funds. The Vanguard Group, Inc. is currently the company's largest shareholder with 11% of shares outstanding. With 11% and 7.3% of the shares outstanding respectively, BlackRock, Inc. and FMR LLC are the second and third largest shareholders.

A closer look at our ownership figures suggests that the top 13 shareholders have a combined ownership of 50% implying that no single shareholder has a majority.

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 Federated Hermes

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.

We can report that insiders do own shares in Federated Hermes, Inc.. This is a big company, so it is good to see this level of alignment. Insiders own US$131m worth of shares (at current prices). Most would say this shows 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, who are usually individual investors, hold a 13% stake in Federated Hermes. 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:

It's always worth thinking about the different groups who own shares in a company. But to understand Federated Hermes better, we need to consider many other factors. For example, we've discovered 1 warning sign for Federated Hermes that you should be aware of before investing here.

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.