Institutional investors may adopt severe steps after Freeport-McMoRan Inc.'s (NYSE:FCX) latest 6.6% drop adds to a year losses

By
Simply Wall St
Published
May 09, 2022
NYSE:FCX
Source: Shutterstock

If you want to know who really controls Freeport-McMoRan Inc. (NYSE:FCX), then you'll have to look at the makeup of its share registry. With 79% 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).

And institutional investors saw their holdings value drop by 6.6% last week. Needless to say, the recent loss which further adds to the one-year loss to shareholders of 13% might not go down well especially with this category of shareholders. Often called “market makers”, institutions wield significant power in influencing the price dynamics of any stock. As a result, if the decline continues, institutional investors may be pressured to sell Freeport-McMoRan which might hurt individual investors.

Let's delve deeper into each type of owner of Freeport-McMoRan, beginning with the chart below.

View our latest analysis for Freeport-McMoRan

ownership-breakdown
NYSE:FCX Ownership Breakdown May 9th 2022

What Does The Institutional Ownership Tell Us About Freeport-McMoRan?

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.

Freeport-McMoRan already has institutions on the share registry. Indeed, they own a respectable stake in the company. 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. 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 Freeport-McMoRan, (below). Of course, keep in mind that there are other factors to consider, too.

earnings-and-revenue-growth
NYSE:FCX Earnings and Revenue Growth May 9th 2022

Institutional investors own over 50% of the company, so together than can probably strongly influence board decisions. We note that hedge funds don't have a meaningful investment in Freeport-McMoRan. The company's largest shareholder is The Vanguard Group, Inc., with ownership of 7.9%. BlackRock, Inc. is the second largest shareholder owning 7.6% of common stock, and FMR LLC holds about 6.7% of the company stock.

After doing some more digging, we found that the top 20 have the combined ownership of 51% in the company, suggesting that no single shareholder has significant control over the company.

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 Freeport-McMoRan

The definition of an insider can differ slightly between different countries, but members of the board of directors always count. Company management run the business, but the CEO will answer to the board, even if he or she is a member of it.

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.

Our most recent data indicates that insiders own less than 1% of Freeport-McMoRan Inc.. Being so large, we would not expect insiders to own a large proportion of the stock. Collectively, they own US$223m 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

The general public-- including retail investors -- own 21% stake in the company, and hence can't easily be ignored. This size of ownership, while considerable, may not be enough to change company policy if the decision is not in sync with other large shareholders.

Next Steps:

While it is well worth considering the different groups that own a company, there are other factors that are even more important. Case in point: We've spotted 3 warning signs for Freeport-McMoRan you should be aware of, and 1 of them shouldn't be ignored.

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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