Recent uptick might appease McDonald's Corporation (NYSE:MCD) institutional owners after losing 0.3% over the past year
Key Insights
Significantly high institutional ownership implies McDonald's' stock price is sensitive to their trading actions
A total of 25 investors have a majority stake in the company with 41% ownership
If you want to know who really controls McDonald's Corporation (NYSE:MCD), then you'll have to look at the makeup of its share registry. We can see that institutions own the lion's share in the company with 70% ownership. That is, the group stands to benefit the most if the stock rises (or lose the most if there is a downturn).
After a year of 0.3% losses, last week’s 4.7% gain would be welcomed by institutional investors as a likely sign that returns might start trending higher.
Let's take a closer look to see what the different types of shareholders can tell us about McDonald's.
Check out our latest analysis for McDonald's
What Does The Institutional Ownership Tell Us About McDonald's?
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 McDonald's. 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. 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 McDonald'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. Hedge funds don't have many shares in McDonald's. The company's largest shareholder is The Vanguard Group, Inc., with ownership of 9.4%. Meanwhile, the second and third largest shareholders, hold 7.0% and 4.7%, of the shares outstanding, respectively.
A deeper look at our ownership data shows that the top 25 shareholders collectively hold less than half of the register, suggesting a large group of small holders where no single shareholder has a majority.
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 McDonald's
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.
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 McDonald's Corporation 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$237m 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
With a 30% ownership, the general public, mostly comprising of individual investors, have some degree of sway over McDonald's. 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:
While it is well worth considering the different groups that own a company, there are other factors that are even more important. For instance, we've identified 2 warning signs for McDonald's that you should be aware of.
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.
