The Home Depot, Inc.'s (NYSE:HD) high institutional ownership speaks for itself as stock continues to impress, up 6.5% over last week

Key Insights

• Institutions' substantial holdings in Home Depot implies that they have significant influence over the company's share price
• The top 25 shareholders own 45% of the company
• Recent sales by insiders

Every investor in The Home Depot, Inc. (NYSE:HD) should be aware of the most powerful shareholder groups. We can see that institutions own the lion's share in the company with 72% ownership. In other words, the group stands to gain the most (or lose the most) from their investment into the company.

And things are looking up for institutional investors after the company gained US$25b in market cap last week. The one-year return on investment is currently 22% and last week's gain would have been more than welcomed.

In the chart below, we zoom in on the different ownership groups of Home Depot.

View our latest analysis for Home Depot

What Does The Institutional Ownership Tell Us About Home Depot?

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.

As you can see, institutional investors have a fair amount of stake in Home Depot. 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 Home Depot's historic earnings and revenue below, but keep in mind there's always more to the story.

Investors should note that institutions actually own more than half the company, so they can collectively wield significant power. We note that hedge funds don't have a meaningful investment in Home Depot. Our data shows that The Vanguard Group, Inc. is the largest shareholder with 9.6% of shares outstanding. With 7.0% and 4.5% of the shares outstanding respectively, BlackRock, Inc. and State Street Global Advisors, Inc. are the second and third largest shareholders.

A deeper look at our ownership data shows that the top 25 shareholders collectively hold less than half of the register, suggesting a large group of small holders where no single shareholder has a majority.

Researching institutional ownership is a good way to gauge and filter a stock's expected performance. The same can be achieved by studying analyst sentiments. Quite a few analysts cover the stock, so you could look into forecast growth quite easily.

Insider Ownership Of Home Depot

While the precise definition of an insider can be subjective, almost everyone considers board members to be insiders. 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.

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 most recent data indicates that insiders own less than 1% of The Home Depot, Inc.. 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$223m worth of shares (at current prices). It is good to see board members owning shares, but it might be worth checking if those insiders have been buying.

General Public Ownership

The general public, who are usually individual investors, hold a 28% stake in Home Depot. While this group can't necessarily call the shots, it can certainly have a real influence on how the company is run.

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. Take risks for example - Home Depot has 1 warning sign we think you should be aware of.

Ultimately the future is most important. You can access this free report on analyst forecasts for the company.

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.