Phillips 66's (NYSE:PSX) institutional investors lost 3.8% last week but have benefitted from longer-term gains
Key Insights
Institutions' substantial holdings in Phillips 66 implies that they have significant influence over the company's share price
50% of the business is held by the top 22 shareholders
To get a sense of who is truly in control of Phillips 66 (NYSE:PSX), it is important to understand the ownership structure of the business. We can see that institutions own the lion's share in the company with 78% ownership. That is, the group stands to benefit the most if the stock rises (or lose the most if there is a downturn).
Institutional investors endured the highest losses after the company's market cap fell by US$2.6b last week. However, the 59% one-year return to shareholders might have softened the blow. They should, however, be mindful of further losses in the future.
In the chart below, we zoom in on the different ownership groups of Phillips 66.
Check out our latest analysis for Phillips 66
What Does The Institutional Ownership Tell Us About Phillips 66?
Many institutions measure their performance against an index that approximates the local market. So they usually pay more attention to companies that are included in major indices.
As you can see, institutional investors have a fair amount of stake in Phillips 66. 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 Phillips 66'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 Phillips 66. Looking at our data, we can see that the largest shareholder is The Vanguard Group, Inc. with 9.3% of shares outstanding. In comparison, the second and third largest shareholders hold about 8.2% and 6.9% of the stock.
Looking at the shareholder registry, we can see that 50% of the ownership is controlled by the top 22 shareholders, meaning that no single shareholder has a majority interest in the ownership.
While it makes sense to study institutional ownership data for a company, it also makes sense to study analyst sentiments to know which way the wind is blowing. There are plenty of analysts covering the stock, so it might be worth seeing what they are forecasting, too.
Insider Ownership Of Phillips 66
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.
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 data suggests that insiders own under 1% of Phillips 66 in their own names. Being so large, we would not expect insiders to own a large proportion of the stock. Collectively, they own US$163m of stock. It is good to see board members owning shares, but it might be worth checking if those insiders have been buying.
General Public Ownership
With a 22% ownership, the general public, mostly comprising of individual investors, have some degree of sway over Phillips 66. While this size of ownership may not be enough to sway a policy decision in their favour, they can still make a collective impact on company policies.
Next Steps:
It's always worth thinking about the different groups who own shares in a company. But to understand Phillips 66 better, we need to consider many other factors. Like risks, for instance. Every company has them, and we've spotted 2 warning signs for Phillips 66 (of which 1 is concerning!) you should know about.
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.
