Key Insights

• Significantly high institutional ownership implies Caterpillar's stock price is sensitive to their trading actions
• 50% of the business is held by the top 24 shareholders
• Insiders have been selling lately

A look at the shareholders of Caterpillar Inc. (NYSE:CAT) can tell us which group is most powerful. We can see that institutions own the lion's share in the company with 72% ownership. Put another way, the group faces the maximum upside potential (or downside risk).

And as as result, institutional investors reaped the most rewards after the company's stock price gained 4.0% last week. The one-year return on investment is currently 35% and last week's gain would have been more than welcomed.

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

What Does The Institutional Ownership Tell Us About Caterpillar?

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 Caterpillar 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 Caterpillar, (below). Of course, keep in mind that there are other factors to consider, too.

Since institutional investors own more than half the issued stock, the board will likely have to pay attention to their preferences. Caterpillar is not owned by hedge funds. The Vanguard Group, Inc. is currently the company's largest shareholder with 9.7% of shares outstanding. Meanwhile, the second and third largest shareholders, hold 7.6% and 6.7%, of the shares outstanding, respectively.

A closer look at our ownership figures suggests that the top 24 shareholders have a combined ownership of 50% implying that 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 Caterpillar

While the precise definition of an insider can be subjective, almost everyone considers board members to be insiders. 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.

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 Caterpillar Inc. in their own names. As it is a large company, we'd only expect insiders to own a small percentage of it. But it's worth noting that they own US$312m worth of shares. Arguably recent buying and selling is just as important to consider. You can click here to see if insiders have been buying or selling.

General Public Ownership

With a 28% ownership, the general public, mostly comprising of individual investors, have some degree of sway over Caterpillar. 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:

While it is well worth considering the different groups that own a company, there are other factors that are even more important. For example, we've discovered 2 warning signs for Caterpillar that you should be aware of before investing here.

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.