In the wake of Old Dominion Freight Line, Inc.'s (NASDAQ:ODFL) latest US$3.7b market cap drop, institutional owners may be forced to take severe actions

Key Insights

• Given the large stake in the stock by institutions, Old Dominion Freight Line's stock price might be vulnerable to their trading decisions
• 50% of the business is held by the top 11 shareholders
• Insiders have sold recently

If you want to know who really controls Old Dominion Freight Line, Inc. (NASDAQ:ODFL), then you'll have to look at the makeup of its share registry. The group holding the most number of shares in the company, around 79% to be precise, is institutions. That is, the group stands to benefit the most if the stock rises (or lose the most if there is a downturn).

And institutional investors endured the highest losses after the company's share price fell by 8.8% last week. Needless to say, the recent loss which further adds to the one-year loss to shareholders of 12% might not go down well especially with this category of shareholders. Also referred to as "smart money", institutions have a lot of sway over how a stock's price moves. As a result, if the downtrend continues, institutions may face pressures to sell Old Dominion Freight Line, which might have negative implications on individual investors.

In the chart below, we zoom in on the different ownership groups of Old Dominion Freight Line.

View our latest analysis for Old Dominion Freight Line

What Does The Institutional Ownership Tell Us About Old Dominion Freight Line?

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.

Old Dominion Freight Line 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. 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 Old Dominion Freight Line's historic earnings and revenue below, but keep in mind there's always more to the story.

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 Old Dominion Freight Line. Our data shows that The Vanguard Group, Inc. is the largest shareholder with 10% of shares outstanding. For context, the second largest shareholder holds about 8.6% of the shares outstanding, followed by an ownership of 7.8% by the third-largest shareholder.

A closer look at our ownership figures suggests that the top 11 shareholders have a combined ownership of 50% implying that no single shareholder has a majority.

While studying institutional ownership for a company can add value to your research, it is also a good practice to research analyst recommendations to get a deeper understand of a stock's expected performance. Quite a few analysts cover the stock, so you could look into forecast growth quite easily.

Insider Ownership Of Old Dominion Freight Line

The definition of an insider can differ slightly between different countries, but members of the board of directors always count. 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.

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.

It seems insiders own a significant proportion of Old Dominion Freight Line, Inc.. It is very interesting to see that insiders have a meaningful US$4.1b stake in this US$39b business. Most would say this shows a good degree of alignment with shareholders, especially in a company of this size. You can click here to see if those insiders have been buying or selling.

General Public Ownership

The general public-- including retail investors -- own 10% stake in the company, and hence can't easily be ignored. 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 Old Dominion Freight Line better, we need to consider many other factors. To that end, you should be aware of the 1 warning sign we've spotted with Old Dominion Freight Line .

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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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.