Arthur J. Gallagher & Co.'s (NYSE:AJG) high institutional ownership speaks for itself as stock continues to impress, up 3.8% over last week

Key Insights

• Significantly high institutional ownership implies Arthur J. Gallagher's stock price is sensitive to their trading actions
• A total of 22 investors have a majority stake in the company with 50% ownership
• Recent purchases by insiders

If you want to know who really controls Arthur J. Gallagher & Co. (NYSE:AJG), then you'll have to look at the makeup of its share registry. We can see that institutions own the lion's share in the company with 78% ownership. That is, the group stands to benefit the most if the stock rises (or lose the most if there is a downturn).

And last week, institutional investors ended up benefitting the most after the company hit US$72b in market cap. The one-year return on investment is currently 23% and last week's gain would have been more than welcomed.

In the chart below, we zoom in on the different ownership groups of Arthur J. Gallagher.

See our latest analysis for Arthur J. Gallagher

What Does The Institutional Ownership Tell Us About Arthur J. Gallagher?

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 Arthur J. Gallagher 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. 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 Arthur J. Gallagher's historic earnings and revenue below, but keep in mind there's always more to the story.

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 Arthur J. Gallagher. The Vanguard Group, Inc. is currently the company's largest shareholder with 10% of shares outstanding. With 7.0% and 6.7% of the shares outstanding respectively, BlackRock, Inc. and Capital Research and Management Company 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 22 shareholders, meaning that no single shareholder has a majority interest in the ownership.

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. Quite a few analysts cover the stock, so you could look into forecast growth quite easily.

Insider Ownership Of Arthur J. Gallagher

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

We can report that insiders do own shares in Arthur J. Gallagher & Co.. It is a very large company, and board members collectively own US$754m worth of shares (at current prices). Most would say this shows a good 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-- including retail investors -- own 21% 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. For example, we've discovered 3 warning signs for Arthur J. Gallagher that you should be aware of before investing here.

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.