Stock Analysis

With 62% institutional ownership, NewMarket Corporation (NYSE:NEU) is a favorite amongst the big guns

NYSE:NEU
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Key Insights

  • Institutions' substantial holdings in NewMarket implies that they have significant influence over the company's share price
  • A total of 8 investors have a majority stake in the company with 51% ownership
  • Recent sales by insiders

A look at the shareholders of NewMarket Corporation (NYSE:NEU) can tell us which group is most powerful. With 62% stake, institutions possess the maximum shares in the company. In other words, the group stands to gain the most (or lose the most) from their investment into the company.

Since institutional have access to huge amounts of capital, their market moves tend to receive a lot of scrutiny by retail or individual investors. Therefore, a good portion of institutional money invested in the company is usually a huge vote of confidence on its future.

In the chart below, we zoom in on the different ownership groups of NewMarket.

Check out our latest analysis for NewMarket

ownership-breakdown
NYSE:NEU Ownership Breakdown May 27th 2024

What Does The Institutional Ownership Tell Us About NewMarket?

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.

NewMarket already has institutions on the share registry. Indeed, they own a respectable stake in the company. 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 NewMarket's historic earnings and revenue below, but keep in mind there's always more to the story.

earnings-and-revenue-growth
NYSE:NEU Earnings and Revenue Growth May 27th 2024

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 NewMarket. Our data shows that Bruce Gottwald is the largest shareholder with 12% of shares outstanding. Meanwhile, the second and third largest shareholders, hold 9.2% and 7.5%, of the shares outstanding, respectively. Additionally, the company's CEO Thomas Gottwald directly holds 3.8% of the total shares outstanding.

We also observed that the top 8 shareholders account for more than half of the share register, with a few smaller shareholders to balance the interests of the larger ones to a certain extent.

Researching institutional ownership is a good way to gauge and filter a stock's expected performance. The same can be achieved by studying analyst sentiments. As far as we can tell there isn't analyst coverage of the company, so it is probably flying under the radar.

Insider Ownership Of NewMarket

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.

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.

It seems insiders own a significant proportion of NewMarket Corporation. It is very interesting to see that insiders have a meaningful US$1.2b stake in this US$5.2b business. It is good to see this level of investment. You can check here to see if those insiders have been buying recently.

General Public Ownership

The general public, who are usually individual investors, hold a 14% stake in NewMarket. 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. For example, we've discovered 2 warning signs for NewMarket that you should be aware of before investing here.

Of course this may not be the best stock to buy. Therefore, you may wish to see our free collection of interesting prospects boasting favorable financials.

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.

Valuation is complex, but we're helping make it simple.

Find out whether NewMarket is potentially over or undervalued by checking out our comprehensive analysis, which includes fair value estimates, risks and warnings, dividends, insider transactions and financial health.

View the Free Analysis

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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.