Stock Analysis

Is Baxter International Inc. (NYSE:BAX) Popular Amongst Institutions?

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NYSE:BAX
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Every investor in Baxter International Inc. (NYSE:BAX) should be aware of the most powerful shareholder groups. Insiders often own a large chunk of younger, smaller, companies while huge companies tend to have institutions as shareholders. We also tend to see lower insider ownership in companies that were previously publicly owned.

Baxter International has a market capitalization of US$40b, so it's too big to fly under the radar. We'd expect to see both institutions and retail investors owning a portion of the company. Taking a look at our data on the ownership groups (below), it seems that institutions own shares in the company. Let's take a closer look to see what the different types of shareholders can tell us about Baxter International.

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ownership-breakdown
NYSE:BAX Ownership Breakdown February 15th 2021

What Does The Institutional Ownership Tell Us About Baxter International?

Many institutions measure their performance against an index that approximates the local market. So they usually pay more attention to companies that are included in major indices.

We can see that Baxter International does have institutional investors; and they hold a good portion of the company's stock. This can indicate that the company has a certain degree of credibility in the investment community. However, it is best to be wary of relying on the supposed validation that comes with institutional investors. They too, get it wrong sometimes. 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 Baxter International, (below). Of course, keep in mind that there are other factors to consider, too.

earnings-and-revenue-growth
NYSE:BAX Earnings and Revenue Growth February 15th 2021

Institutional investors own over 50% of the company, so together than can probably strongly influence board decisions. Hedge funds don't have many shares in Baxter International. The company's largest shareholder is BlackRock, Inc., with ownership of 8.0%. With 7.7% and 5.6% of the shares outstanding respectively, The Vanguard Group, Inc. and Wellington Management Group LLP are the second and third largest shareholders.

Looking at the shareholder registry, we can see that 50% of the ownership is controlled by the top 18 shareholders, meaning that no single shareholder has a majority interest in the ownership.

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 are a reasonable number of analysts covering the stock, so it might be useful to find out their aggregate view on the future.

Insider Ownership Of Baxter International

While the precise definition of an insider can be subjective, almost everyone considers board members to be insiders. The company management answer to the board and the latter should represent the interests of shareholders. Notably, sometimes top-level managers are on the board themselves.

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 data suggests that insiders own under 1% of Baxter International Inc. in their own names. Being so large, we would not expect insiders to own a large proportion of the stock. Collectively, they own US$56m of stock. 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 18% stake in the company, will not 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:

It's always worth thinking about the different groups who own shares in a company. But to understand Baxter International better, we need to consider many other factors. For instance, we've identified 2 warning signs for Baxter International that you should be aware of.

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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