Institutional investors are Genuine Parts Company's (NYSE:GPC) biggest bettors and were rewarded after last week's US$864m market cap gain

By
Simply Wall St
Published
April 11, 2022
NYSE:GPC
Source: Shutterstock

To get a sense of who is truly in control of Genuine Parts Company (NYSE:GPC), it is important to understand the ownership structure of the business. With 77% stake, institutions possess the maximum shares in the company. That is, the group stands to benefit the most if the stock rises (or lose the most if there is a downturn).

And last week, institutional investors ended up benefitting the most after the company hit US$19b in market cap. One-year return to shareholders is currently 16% and last week’s gain was the icing on the cake.

Let's take a closer look to see what the different types of shareholders can tell us about Genuine Parts.

View our latest analysis for Genuine Parts

ownership-breakdown
NYSE:GPC Ownership Breakdown April 11th 2022

What Does The Institutional Ownership Tell Us About Genuine Parts?

Institutions typically measure themselves against a benchmark when reporting to their own investors, so they often become more enthusiastic about a stock once it's included in a major index. We would expect most companies to have some institutions on the register, especially if they are growing.

We can see that Genuine Parts does have institutional investors; and they hold a good portion of the company's stock. 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 Genuine Parts' historic earnings and revenue below, but keep in mind there's always more to the story.

earnings-and-revenue-growth
NYSE:GPC Earnings and Revenue Growth April 11th 2022

Since institutional investors own more than half the issued stock, the board will likely have to pay attention to their preferences. Genuine Parts is not owned by hedge funds. The Vanguard Group, Inc. is currently the company's largest shareholder with 12% of shares outstanding. Meanwhile, the second and third largest shareholders, hold 8.9% and 5.7%, of the shares outstanding, respectively.

A closer look at our ownership figures suggests that the top 24 shareholders have a combined ownership of 50% implying that no single shareholder has a majority.

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. Quite a few analysts cover the stock, so you could look into forecast growth quite easily.

Insider Ownership Of Genuine Parts

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.

Our information suggests that Genuine Parts Company insiders own under 1% of the company. It is a very large company, so it would be surprising to see insiders own a large proportion of the company. Though their holding amounts to less than 1%, we can see that board members collectively own US$37m worth of shares (at current prices). Arguably recent buying and selling is just as important to consider. You can click here to see if insiders have been buying or selling.

General Public Ownership

With a 22% ownership, the general public, mostly comprising of individual investors, have some degree of sway over Genuine Parts. While this group can't necessarily call the shots, it can certainly have a real influence on how the company is run.

Next Steps:

It's always worth thinking about the different groups who own shares in a company. But to understand Genuine Parts better, we need to consider many other factors. To that end, you should be aware of the 1 warning sign we've spotted with Genuine Parts .

If you are like me, you may want to think about whether this company will grow or shrink. Luckily, you can check this free report showing analyst forecasts for its future.

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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