Institutional owners may ignore O'Reilly Automotive, Inc.'s (NASDAQ:ORLY) recent US$3.3b market cap decline as longer-term profits stay in the green

Key Insights

• Significantly high institutional ownership implies O'Reilly Automotive's stock price is sensitive to their trading actions
• 49% of the business is held by the top 25 shareholders
• Insiders have been selling lately

If you want to know who really controls O'Reilly Automotive, Inc. (NASDAQ:ORLY), then you'll have to look at the makeup of its share registry. With 86% 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.

Institutional investors was the group most impacted after the company's market cap fell to US$62b last week. However, the 12% one-year return to shareholders may have helped lessen their pain. They should, however, be mindful of further losses in the future.

In the chart below, we zoom in on the different ownership groups of O'Reilly Automotive.

Check out our latest analysis for O'Reilly Automotive

What Does The Institutional Ownership Tell Us About O'Reilly Automotive?

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.

O'Reilly Automotive 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 O'Reilly Automotive, (below). Of course, keep in mind that there are other factors to consider, too.

Since institutional investors own more than half the issued stock, the board will likely have to pay attention to their preferences. We note that hedge funds don't have a meaningful investment in O'Reilly Automotive. Our data shows that The Vanguard Group, Inc. is the largest shareholder with 8.5% of shares outstanding. BlackRock, Inc. is the second largest shareholder owning 6.9% of common stock, and State Street Global Advisors, Inc. holds about 4.1% of the company stock.

On studying our ownership data, we found that 25 of the top shareholders collectively own less than 50% of the share register, implying that no single individual has a majority interest.

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. There are a reasonable number of analysts covering the stock, so it might be useful to find out their aggregate view on the future.

Insider Ownership Of O'Reilly Automotive

The definition of company insiders can be subjective and does vary between jurisdictions. Our data reflects individual insiders, capturing board members at the very least. The company management answer to the board and the latter should represent the interests of shareholders. Notably, sometimes top-level managers are on the board themselves.

I generally consider insider ownership to be a good thing. However, on some occasions it makes it more difficult for other shareholders to hold the board accountable for decisions.

Our information suggests that O'Reilly Automotive, Inc. insiders own under 1% of the company. Being so large, we would not expect insiders to own a large proportion of the stock. Collectively, they own US$564m of stock. 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

The general public-- including retail investors -- own 12% stake in the company, and hence can't easily be ignored. 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:

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. To that end, you should learn about the 3 warning signs we've spotted with O'Reilly Automotive (including 1 which is a bit concerning) .

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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.