Key Insights

• Institutions' substantial holdings in Churchill Downs implies that they have significant influence over the company's share price
• The top 9 shareholders own 50% of the company
• Recent purchases by insiders

To get a sense of who is truly in control of Churchill Downs Incorporated (NASDAQ:CHDN), it is important to understand the ownership structure of the business. The group holding the most number of shares in the company, around 79% to be precise, is institutions. In other words, the group stands to gain the most (or lose the most) from their investment into the company.

Institutional investors would appreciate the 7.1% increase in share price last week, given their one-year losses have totalled a disappointing 4.8%.

Let's take a closer look to see what the different types of shareholders can tell us about Churchill Downs.

What Does The Institutional Ownership Tell Us About Churchill Downs?

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.

We can see that Churchill Downs does have institutional investors; and they hold a good portion of the company's stock. 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. It is not uncommon to see a big share price drop if two large institutional investors try to sell out of a stock at the same time. So it is worth checking the past earnings trajectory of Churchill Downs, (below). Of course, keep in mind that there are other factors to consider, too.

Investors should note that institutions actually own more than half the company, so they can collectively wield significant power. Hedge funds don't have many shares in Churchill Downs. Our data shows that Capital Research and Management Company is the largest shareholder with 13% of shares outstanding. With 9.2% and 8.3% of the shares outstanding respectively, The Vanguard Group, Inc. and BlackRock, Inc. are the second and third largest shareholders. Furthermore, CEO William Carstanjen is the owner of 2.0% of the company's shares.

On further inspection, we found that more than half the company's shares are owned by the top 9 shareholders, suggesting that the interests of the larger shareholders are balanced out to an extent by the smaller ones.

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 Churchill Downs

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.

We can report that insiders do own shares in Churchill Downs Incorporated. It is a very large company, and board members collectively own US$361m worth of shares (at current prices). we sometimes take an interest in whether they have been buying or selling.

General Public Ownership

With a 12% ownership, the general public, mostly comprising of individual investors, have some degree of sway over Churchill Downs. 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.

Private Company Ownership

Our data indicates that Private Companies hold 5.7%, of the company's shares. It might be worth looking deeper into this. If related parties, such as insiders, have an interest in one of these private companies, that should be disclosed in the annual report. Private companies may also have a strategic interest in the company.

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 Churchill Downs (1 is a bit unpleasant) that you should be aware of.

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.

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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.