Could The Johnson & Johnson (NYSE:JNJ) Ownership Structure Tell Us Something Useful?

The big shareholder groups in Johnson & Johnson (NYSE:JNJ) have power over the company. Institutions often own shares in more established companies, while it’s not unusual to see insiders own a fair bit of smaller companies. Companies that have been privatized tend to have low insider ownership.

With a market capitalization of US$344b, Johnson & Johnson is rather large. We’d expect to see institutional investors on the register. Companies of this size are usually well known to retail investors, too. Taking a look at the our data on the ownership groups (below), it’s seems that institutions own shares in the company. We can zoom in on the different ownership groups, to learn more about JNJ.

See our latest analysis for Johnson & Johnson

NYSE:JNJ Ownership Summary December 25th 18
NYSE:JNJ Ownership Summary December 25th 18

What Does The Institutional Ownership Tell Us About Johnson & Johnson?

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.

Johnson & Johnson already has institutions on the share registry. Indeed, they own 68% of 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. 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 Johnson & Johnson’s historic earnings and revenue, below, but keep in mind there’s always more to the story.

NYSE:JNJ Income Statement Export December 25th 18
NYSE:JNJ Income Statement Export December 25th 18

Since institutional investors own more than half the issued stock, the board will likely have to pay attention to their preferences. Johnson & Johnson is not owned by hedge funds. There are plenty of analysts covering the stock, so it might be worth seeing what they are forecasting, too.

Insider Ownership Of Johnson & Johnson

While the precise definition of an insider can be subjective, almost everyone considers board members to be insiders. 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 data suggests that insiders own under 1% of Johnson & Johnson in their own names. It is a very large company, so it would be surprising to see insiders own a large proportion of the company. Though their holding amount to less than 1%, we can see that board members collectively own US$173m worth of shares (at current prices). It is always good to see at least some insider ownership, but it might be worth checking if those insiders have been selling.

General Public Ownership

With a 31% ownership, the general public have some degree of sway over JNJ. 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:

I find it very interesting to look at who exactly owns a company. But to truly gain insight, we need to consider other information, too.

I like to dive deeper into how a company has performed in the past. You can find historic revenue and earnings in this detailed graph.

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.

To help readers see past the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price-sensitive company announcements.

The author is an independent contributor and at the time of publication had no position in the stocks mentioned. For errors that warrant correction please contact the editor at editorial-team@simplywallst.com.