With 81% ownership, Valero Energy Corporation (NYSE:VLO) boasts of strong institutional backing

Key Insights

• Given the large stake in the stock by institutions, Valero Energy's stock price might be vulnerable to their trading decisions
• The top 24 shareholders own 51% of the company
• Ownership research along with analyst forecasts data help provide a good understanding of opportunities in a stock

A look at the shareholders of Valero Energy Corporation (NYSE:VLO) can tell us which group is most powerful. With 81% 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).

Since institutional have access to huge amounts of capital, their market moves tend to receive a lot of scrutiny by retail or individual investors. As a result, a sizeable amount of institutional money invested in a firm is generally viewed as a positive attribute.

Let's take a closer look to see what the different types of shareholders can tell us about Valero Energy.

View our latest analysis for Valero Energy

What Does The Institutional Ownership Tell Us About Valero Energy?

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.

As you can see, institutional investors have a fair amount of stake in Valero Energy. 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. When multiple institutions own a stock, there's always a risk that they are in a 'crowded trade'. When such a trade goes wrong, multiple parties may compete to sell stock fast. This risk is higher in a company without a history of growth. You can see Valero Energy's historic earnings and revenue below, but keep in mind there's always more to the story.

Since institutional investors own more than half the issued stock, the board will likely have to pay attention to their preferences. Valero Energy is not owned by hedge funds. The Vanguard Group, Inc. is currently the largest shareholder, with 9.8% of shares outstanding. BlackRock, Inc. is the second largest shareholder owning 8.7% of common stock, and State Street Global Advisors, Inc. holds about 7.0% of the company stock.

After doing some more digging, we found that the top 24 have the combined ownership of 51% in the company, suggesting that no single shareholder has significant control over the company.

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 Valero Energy

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

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 Valero Energy Corporation insiders own under 1% of the company. Being so large, we would not expect insiders to own a large proportion of the stock. Collectively, they own US$256m of stock. It is good to see board members owning shares, but it might be worth checking if those insiders have been buying.

General Public Ownership

With a 18% ownership, the general public, mostly comprising of individual investors, have some degree of sway over Valero Energy. 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 - Valero Energy has 2 warning signs (and 1 which shouldn't be ignored) we think you should know about.

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. 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.