After losing 19% in the past year, Dow Inc. (NYSE:DOW) institutional owners must be relieved by the recent gain

Key Insights

• Significantly high institutional ownership implies Dow's stock price is sensitive to their trading actions
• 47% of the business is held by the top 25 shareholders
• Recent purchases by insiders

Every investor in Dow Inc. (NYSE:DOW) should be aware of the most powerful shareholder groups. We can see that institutions own the lion's share in the company with 70% ownership. That is, the group stands to benefit the most if the stock rises (or lose the most if there is a downturn).

Last week's US$1.0b market cap gain would probably be appreciated by institutional investors, especially after a year of 19% losses.

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

Check out our latest analysis for Dow

What Does The Institutional Ownership Tell Us About Dow?

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 Dow 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. 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 Dow'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 Dow. The company's largest shareholder is The Vanguard Group, Inc., with ownership of 12%. Meanwhile, the second and third largest shareholders, hold 7.2% and 5.0%, of the shares outstanding, respectively.

On studying our ownership data, we found that 25 of the top shareholders collectively own less than 50% of the share register, implying that no single individual has a majority interest.

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 plenty of analysts covering the stock, so it might be worth seeing what they are forecasting, too.

Insider Ownership Of Dow

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.

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 Dow Inc. insiders own under 1% of the company. As it is a large company, we'd only expect insiders to own a small percentage of it. But it's worth noting that they own US$50m worth of shares. 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, who are usually individual investors, hold a 29% stake in Dow. 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 Dow better, we need to consider many other factors. Consider for instance, the ever-present spectre of investment risk. We've identified 3 warning signs with Dow (at least 1 which makes us a bit uncomfortable) , and understanding them should be part of your investment process.

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.

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

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.