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Given the large stake in the stock by institutions, Wells Fargo’s stock price might be vulnerable to their trading decisions
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50% of the business is held by the top 20 shareholders
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Using data from analyst forecasts alongside ownership research, one can better assess the future performance of a company
To get a sense of who is truly in control of Wells Fargo & Company (NYSE:WFC), it is important to understand the ownership structure of the business. And the group that holds the biggest piece of the pie are institutions with 78% ownership. In other words, the group stands to gain the most (or lose the most) from their investment into the company.
And last week, institutional investors ended up benefitting the most after the company hit US$263b in market cap. The gains from last week would have further boosted the one-year return to shareholders which currently stand at 44%.
Let’s delve deeper into each type of owner of Wells Fargo, beginning with the chart below.
Check out our latest analysis for Wells Fargo
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.
Wells Fargo 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 Wells Fargo’s historic earnings and revenue below, but keep in mind there’s always more to the story.
Institutional investors own over 50% of the company, so together than can probably strongly influence board decisions. We note that hedge funds don’t have a meaningful investment in Wells Fargo. The Vanguard Group, Inc. is currently the largest shareholder, with 9.4% of shares outstanding. In comparison, the second and third largest shareholders hold about 8.0% and 4.9% of the stock.
After doing some more digging, we found that the top 20 have the combined ownership of 50% in the company, suggesting that no single shareholder has significant control over the company.
