In this analysis, my focus will be on developing a perspective on Thermo Fisher Scientific Inc’s (NYSE:TMO) latest ownership structure, a less discussed, but important factor. Ownership structure has been found to have an impact on shareholder returns in both short- and long-term. If an activist institution invests the same amount of capital in a stock as a passive long-term pension fund, the implications are potentially different for key corporate financing decisions such as the use of excess cash or the source of financing. While these are more of a long-term investor’s concern, short-term investors may find the impact of institutional trading overwhelming enough to lose out on what could be a potential opportunity. Therefore, I will take a look at TMO's shareholders in more detail.
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Institutional Ownership
Institutions account for 88.60% of TMO's outstanding shares, a significant enough holding to move stock prices if they start buying and selling in large quantities, especially when there are relatively small amounts of shares available on the market to trade. These moves, at least in the short-term, are generally observed in an institutional ownership mix comprising of active stock pickers, in particular levered hedge funds, which can cause large price swings. In the case of TMO, investors need not worry about such volatility considering active hedge funds don't have a significant stake. However, we should dig deeper into TMO's ownership structure and find out how other key ownership classes can affect its investment profile.Insider Ownership
Insiders form a group of important ownership types as they manage the company's operations and decide the best use of capital. Insider ownership has been linked to better alignment between management and shareholders. Although individuals in TMO hold only a minor stake, given TMO is a large-cap company, it is relatively meaningful. This is a good sign for shareholders as the company's executives and directors have their incentives directly linked to the company's performance. It would also be interesting to check what insiders have been doing with their shareholding recently. Insider buying can be a positive indicator of future performance, but a selling decision can be simply driven by personal financial requirements.General Public Ownership
A substantial ownership of 11.21% in TMO is held by the general public. This level of ownership gives retail investors the power to sway key policy decisions such as board composition, executive compensation, and potential acquisitions. This is a positive sign for an investor who wants to be involved in key decision-making of the company.Private Company Ownership
Another important group of owners for potential investors in TMO are private companies that hold a stake of 0.0023% in TMO. These are companies that are mainly invested due to their strategic interests or are incentivized by reaping capital gains on investments their shareholdings. However, an ownership of this size may be relatively insignificant, meaning that these shareholders may not have the potential to influence TMO's business strategy. Thus, investors not need worry too much about the consequences of these holdings.Next Steps:
The company's high institutional ownership makes margin of safety a very important consideration to existing investors since long bull and bear trends often emerge when these big-ticket investors see a change in long-term potential of the company. This will allow investors to reduce the impact of non-fundamental factors, such as volatile block trading impact on their portfolio value. However, ownership structure should not be the only determining factor when you’re building an investment thesis for TMO. Rather, you should be looking at fundamental drivers such as Thermo Fisher Scientific's past track record and financial health. I urge you to complete your research by taking a look at the following:
- Future Outlook: What are well-informed industry analysts predicting for TMO’s future growth? Take a look at our free research report of analyst consensus for TMO’s outlook.
- Past Track Record: Has TMO been consistently performing well irrespective of the ups and downs in the market? Go into more detail in the past performance analysis and take a look at the free visual representations of TMO's historicals for more clarity.
- Other High-Performing Stocks: Are there other stocks that provide better prospects with proven track records? Explore our free list of these great stocks here.
To help readers see pass 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.
Simply Wall St analyst Simply Wall St and Simply Wall St have no position in any of the companies mentioned. This article 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.