If you want to know who really controls Southwest Airlines Co. (NYSE:LUV), then you'll have to look at the makeup of its share registry. Institutions will often hold stock in bigger companies, and we expect to see insiders owning a noticeable percentage of the smaller ones. We also tend to see lower insider ownership in companies that were previously publicly owned.
Southwest Airlines is a pretty big company. It has a market capitalization of US$28b. Normally institutions would own a significant portion of a company this size. Our analysis of the ownership of the company, below, shows that institutions are noticeable on the share registry. We can zoom in on the different ownership groups, to learn more about Southwest Airlines.
What Does The Institutional Ownership Tell Us About Southwest Airlines?
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.
Southwest Airlines 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 Southwest Airlines, (below). Of course, keep in mind that there are other factors to consider, too.
Institutional investors own over 50% of the company, so together than can probably strongly influence board decisions. Southwest Airlines is not owned by hedge funds. The company's largest shareholder is PRIMECAP Management Company, with ownership of 11%. For context, the second largest shareholder holds about 8.9% of the shares outstanding, followed by an ownership of 7.5% by the third-largest shareholder.
After doing some more digging, we found that the top 18 have the combined ownership of 51% in the company, suggesting that no single shareholder has significant control over the company.
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. 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 Southwest Airlines
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.
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 Southwest Airlines Co.. Being so large, we would not expect insiders to own a large proportion of the stock. Collectively, they own US$85m of stock. 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
The general public holds a 25% stake in Southwest Airlines. This size of ownership, while considerable, may not be enough to change company policy if the decision is not in sync with other large shareholders.
It's always worth thinking about the different groups who own shares in a company. But to understand Southwest Airlines better, we need to consider many other factors. For instance, we've identified 3 warning signs for Southwest Airlines (1 can't be ignored) that you should be aware of.
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.
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This article by Simply Wall St is general in nature. 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.
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