Institutional investors control 86% of Gilead Sciences, Inc. (NASDAQ:GILD) and were rewarded last week after stock increased 9.4%

Key Insights

• Institutions' substantial holdings in Gilead Sciences implies that they have significant influence over the company's share price
• The top 15 shareholders own 50% of the company
• Analyst forecasts along with ownership data serve to give a strong idea about prospects for a business

Every investor in Gilead Sciences, Inc. (NASDAQ:GILD) should be aware of the most powerful shareholder groups. And the group that holds the biggest piece of the pie are institutions with 86% 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 9.4% gain means that institutional investors were on the positive end of the spectrum even as the company has shown strong longer-term trends. The gains from last week would have further boosted the one-year return to shareholders which currently stand at 34%.

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

See our latest analysis for Gilead Sciences

What Does The Institutional Ownership Tell Us About Gilead Sciences?

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.

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

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 Gilead Sciences. Capital Research and Management Company is currently the largest shareholder, with 11% of shares outstanding. BlackRock, Inc. is the second largest shareholder owning 9.7% of common stock, and The Vanguard Group, Inc. holds about 9.3% of the company stock.

After doing some more digging, we found that the top 15 have the combined ownership of 50% in the company, suggesting that no single shareholder has significant control over the company.

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

Insider Ownership Of Gilead Sciences

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.

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 most recent data indicates that insiders own less than 1% of Gilead Sciences, Inc.. 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$101m worth of shares. It is good to see board members owning shares, but it might be worth checking if those insiders have been buying.

General Public Ownership

With a 14% ownership, the general public, mostly comprising of individual investors, have some degree of sway over Gilead Sciences. 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 Gilead Sciences better, we need to consider many other factors. To that end, you should be aware of the 4 warning signs we've spotted with Gilead Sciences .

If you would prefer discover what analysts are predicting in terms of future growth, do not miss this free report on analyst forecasts.

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.