Key Insights
- Given the large stake in the stock by institutions, D.R. Horton's stock price might be vulnerable to their trading decisions
- The top 16 shareholders own 51% of the company
- Recent sales by insiders
To get a sense of who is truly in control of D.R. Horton, Inc. (NYSE:DHI), it is important to understand the ownership structure of the business. 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).
And things are looking up for institutional investors after the company gained US$2.9b in market cap last week. The one-year return on investment is currently 40% 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 D.R. Horton.
What Does The Institutional Ownership Tell Us About D.R. Horton?
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.
As you can see, institutional investors have a fair amount of stake in D.R. Horton. 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. 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 D.R. Horton's earnings history below. Of course, the future is what really matters.
Since institutional investors own more than half the issued stock, the board will likely have to pay attention to their preferences. D.R. Horton is not owned by hedge funds. The Vanguard Group, Inc. is currently the company's largest shareholder with 11% of shares outstanding. Meanwhile, the second and third largest shareholders, hold 10% and 9.4%, of the shares outstanding, respectively.
A closer look at our ownership figures suggests that the top 16 shareholders have a combined ownership of 51% implying that no single shareholder has a majority.
While it makes sense to study institutional ownership data for a company, it also makes sense to study analyst sentiments to know which way the wind is blowing. There are plenty of analysts covering the stock, so it might be worth seeing what they are forecasting, too.
Insider Ownership Of D.R. Horton
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.
We can see that insiders own shares in D.R. Horton, Inc.. It is a very large company, and board members collectively own US$1.1b worth of shares (at current prices). It is good to see this level of investment. You can check here to see if those insiders have been buying recently.
General Public Ownership
The general public-- including retail investors -- own 12% stake in the company, and hence can't easily be ignored. While this group can't necessarily call the shots, it can certainly have a real influence on how the company is run.
Next Steps:
While it is well worth considering the different groups that own a company, there are other factors that are even more important. To that end, you should be aware of the 1 warning sign we've spotted with D.R. Horton .
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.