With 86% institutional ownership, The Hershey Company (NYSE:HSY) is a favorite amongst the big guns

Simply Wall St · 07/01 10:13

Key Insights

  • Institutions' substantial holdings in Hershey implies that they have significant influence over the company's share price
  • A total of 6 investors have a majority stake in the company with 51% ownership
  • Ownership research along with analyst forecasts data help provide a good understanding of opportunities in a stock

A look at the shareholders of The Hershey Company (NYSE:HSY) can tell us which group is most powerful. We can see that institutions own the lion's share in the company with 86% ownership. Put another way, the group faces the maximum upside potential (or downside risk).

Since institutional have access to huge amounts of capital, their market moves tend to receive a lot of scrutiny by retail or individual investors. Hence, having a considerable amount of institutional money invested in a company is often regarded as a desirable trait.

Let's delve deeper into each type of owner of Hershey, beginning with the chart below.

Check out our latest analysis for Hershey

ownership-breakdown
NYSE:HSY Ownership Breakdown July 1st 2024

What Does The Institutional Ownership Tell Us About Hershey?

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 Hershey does have institutional investors; and they hold a good portion of the company's stock. This can indicate that the company has a certain degree of credibility in the investment community. However, it is best to be wary of relying on the supposed validation that comes with institutional investors. They too, get it wrong sometimes. 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 Hershey's earnings history below. Of course, the future is what really matters.

earnings-and-revenue-growth
NYSE:HSY Earnings and Revenue Growth July 1st 2024

Institutional investors own over 50% of the company, so together than can probably strongly influence board decisions. Hershey is not owned by hedge funds. The company's largest shareholder is Milton Hershey School Trust, with ownership of 28%. In comparison, the second and third largest shareholders hold about 8.6% and 6.9% of the stock.

On further inspection, we found that more than half the company's shares are owned by the top 6 shareholders, suggesting that the interests of the larger shareholders are balanced out to an extent by the smaller ones.

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. There are plenty of analysts covering the stock, so it might be worth seeing what they are forecasting, too.

Insider Ownership Of Hershey

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.

I generally consider insider ownership to be a good thing. However, on some occasions it makes it more difficult for other shareholders to hold the board accountable for decisions.

Our data suggests that insiders own under 1% of The Hershey Company in their own names. 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$75m worth of shares (at current prices). It is good to see board members owning shares, but it might be worth checking if those insiders have been buying.

General Public Ownership

The general public, who are usually individual investors, hold a 13% stake in Hershey. While this group can't necessarily call the shots, it can certainly have a real influence on how the company is run.

Next Steps:

I find it very interesting to look at who exactly owns a company. But to truly gain insight, we need to consider other information, too. Be aware that Hershey is showing 1 warning sign in our investment analysis , you should know about...

Ultimately the future is most important. You can access this free report on analyst forecasts for the company.

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.