Institutional investors may adopt severe steps after Air Products and Chemicals, Inc.’s (NYSE:APD) latest 4.3% drop adds to a year losses

Key Insights

• Given the large stake in the stock by institutions, Air Products and Chemicals’ stock price might be vulnerable to their trading decisions
• A total of 20 investors have a majority stake in the company with 51% ownership
• Using data from analyst forecasts alongside ownership research, one can better assess the future performance of a company

A look at the shareholders of Air Products and Chemicals, Inc. (NYSE:APD) can tell us which group is most powerful. The group holding the most number of shares in the company, around 84% to be precise, is institutions. Put another way, the group faces the maximum upside potential (or downside risk).

And institutional investors endured the highest losses after the company’s share price fell by 4.3% last week. Needless to say, the recent loss which further adds to the one-year loss to shareholders of 15% might not go down well especially with this category of shareholders. Institutions or “liquidity providers” control large sums of money and therefore, these types of investors usually have a lot of influence over stock price movements. As a result, if the downtrend continues, institutions may face pressures to sell Air Products and Chemicals, which might have negative implications on individual investors.

Let’s take a closer look to see what the different types of shareholders can tell us about Air Products and Chemicals.

View our latest analysis for Air Products and Chemicals

What Does The Institutional Ownership Tell Us About Air Products and Chemicals?

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 Air Products and Chemicals does have institutional investors; and they hold a good portion of the company’s stock. 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. If multiple institutions change their view on a stock at the same time, you could see the share price drop fast. It’s therefore worth looking at Air Products and Chemicals’ earnings history below. Of course, the future is what really matters.

Institutional investors own over 50% of the company, so together than can probably strongly influence board decisions. Hedge funds don’t have many shares in Air Products and Chemicals. The Vanguard Group, Inc. is currently the company’s largest shareholder with 9.4% of shares outstanding. For context, the second largest shareholder holds about 6.8% of the shares outstanding, followed by an ownership of 5.5% by the third-largest shareholder.

After doing some more digging, we found that the top 20 have the combined ownership of 51% in the company, suggesting that no single shareholder has significant control over the company.

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 Air Products and Chemicals

The definition of an insider can differ slightly between different countries, but members of the board of directors always count. Company management run the business, but the CEO will answer to the board, even if he or she is a member of it.

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 Air Products and Chemicals, Inc. 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$212m worth of shares (at current prices). In this sort of situation, it can be more interesting to see if those insiders have been buying or selling.

General Public Ownership

The general public, who are usually individual investors, hold a 16% stake in Air Products and Chemicals. 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.

Next Steps:

It’s always worth thinking about the different groups who own shares in a company. But to understand Air Products and Chemicals better, we need to consider many other factors. Consider for instance, the ever-present spectre of investment risk. We’ve identified 3 warning signs with Air Products and Chemicals (at least 1 which makes us a bit uncomfortable) , and understanding them should be part of your investment process.

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. 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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com