The big shareholder groups in Entergy Corporation (NYSE:ETR) have power over the company. Generally speaking, as a company grows, institutions will increase their ownership. Conversely, insiders often decrease their ownership over time. Companies that have been privatized tend to have low insider ownership.
With a market capitalization of US$22b, Entergy is rather large. We’d expect to see institutional investors on the register. Companies of this size are usually well known to retail investors, too. Our analysis of the ownership of the company, below, shows that institutional investors have bought into the company. Let’s take a closer look to see what the different types of shareholders can tell us about Entergy.
Check out our latest analysis for Entergy
What Does The Institutional Ownership Tell Us About Entergy?
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.
Enterprise 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 Entergy’s historic earnings and revenue below, but keep in mind there’s always more to the story.
Since institutional investors own more than half the issued stock, the board will likely have to pay attention to their preferences. We note that hedge funds do not have a meaningful investment in Entergy. Looking at our data, we can see that the largest shareholder is The Vanguard Group, Inc. with 12% of shares outstanding. For context, the second largest shareholder holds about 9.1% of the outstanding shares, followed by an ownership of 6.8% by the third-largest shareholder.
A closer look at our ownership figures suggests that the top 13 shareholders have a combined ownership of 51% implying that no single shareholder has a majority.
Researching institutional ownership is a good way to gauge and filter the 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 Entergy
The definition of company insiders can be subjective and does vary between jurisdictions. Our data reflects individual insiders, capturing board members at the very least. Management ultimately answers to the board. However, it is not uncommon for managers to be executive board members, especially if they are a founder or the CEO.
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 Entergy 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$90m 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– including retail investors–owns 11% stake in the company, and hence can’t easily be ignored. While this size of ownership may not be enough to sway a policy decision in their favor, they can still make a collective impact on company policies.
While it is well worth considering the different groups that own a company, there are other factors that are even more important. Take risks for example – Entergy has 4 warning signs (and 1 which is significant) we think 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.