Following Northern Trust Corporation’s (NASDAQ:NTRS) latest market cap drop of US$912 million, institutional owners may be forced to take tough action

If you want to know who actually controls Northern Trust Corporation (NASDAQ: NTRS), you’ll need to look at the composition of its stock register. And the group that holds the biggest slice of the pie is made up of 82%-owned institutions. That is, the group will benefit the most if the stock goes up (or lose the most if there is a downturn).

As a result, institutional investors suffered the highest losses last week after the market capitalization plummeted by $912 million. The recent loss, on top of a 35% year-on-year loss to shareholders, may not be suitable for this group of investors. Institutions or “liquidity providers” control large sums of money and therefore these types of investors usually have a lot of influence over stock price movements. Therefore, if the decline continues, institutional investors may be forced to sell Northern Trust, which could hurt individual investors.

Let’s take a closer look at what different types of shareholders can tell us about Northern Trust.

NasdaqGS: NTRS Ownership Breakdown October 24, 2022

What does institutional ownership tell us about Northern Trust?

Institutions typically measure themselves against a benchmark when reporting to their own investors, so they often become more enthusiastic about a stock once it is included in a major index. We would expect most companies to have some institutions listed, especially if they are growing.

We can see that Northern Trust has institutional investors; and they own a good part of the shares of the company. This may indicate that the company has some degree of credibility in the investment community. However, it is best to be wary of relying on the so-called validation that accompanies institutional investors. They are also sometimes wrong. If multiple institutions change their minds on a stock at the same time, you could see the stock price drop quickly. So it’s worth checking out Northern Trust’s earnings history below. Of course, the future is what really matters.

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NasdaqGS: NTRS Earnings and Revenue Growth October 24, 2022

Investors should note that institutions actually own more than half of the company, so they can collectively wield significant power. Hedge funds don’t have a lot of shares in Northern Trust. Looking at our data, we can see that the largest shareholder is The Vanguard Group, Inc. with 11% of the shares outstanding. With 7.6% and 4.3% of shares outstanding, respectively, BlackRock, Inc. and State Street Global Advisors, Inc. are the second and third largest shareholders.

Looking at the shareholder register, we can see that 51% of the ownership is controlled by the 16 major shareholders, which means that no shareholder has a controlling interest in the ownership.

Institutional ownership research is a good way to assess and filter the expected performance of a stock. The same can be obtained by studying the feelings of the analyst. A number of analysts cover the stock, so you can look at growth forecasts quite easily.

Northern Trust Insider Ownership

The definition of company insiders can be subjective and varies from jurisdiction to jurisdiction. Our data reflects individual insiders, capturing at least board members. Management is ultimately responsible to the board of directors. However, it is not uncommon for managers to be members of the management board, especially if they are founders or CEOs.

I generally consider insider ownership to be a good thing. However, there are times when it is more difficult for other shareholders to hold the board accountable for decisions.

We may find that insiders hold shares of Northern Trust Corporation. It’s a very large company and the board members collectively own $193 million worth of stock (at today’s prices). Most would say this shows a good alignment of interests between shareholders and the board. Still, it might be worth checking to see if these insiders have sold.

General public property

The general public, who are generally individual investors, hold a 17% stake in Northern Trust. This size of ownership, although considerable, may not be sufficient to change company policy if the decision is not in line with other major shareholders.

Next steps:

While it is worth considering the different groups that own a business, there are other, even more important factors.

I like to dive deeper on the performance of a company in the past. You can access this interactive chart past earnings, income and cash flow, for free.

If you’re like me, you might want to ask yourself if this business will grow or shrink. Luckily, you can check out this free report showing analyst predictions for its future.

NB: The figures in this article are calculated using trailing twelve month data, which refers to the 12 month period ending on the last day of the month the financial statements are dated. This may not be consistent with the annual report figures for the full year.

This Simply Wall St article is general in nature. We provide commentary based on historical data and analyst forecasts only using unbiased methodology and our articles are not intended to be financial advice. It is not a recommendation to buy or sell stocks and does not take into account your objectives or financial situation. Our goal is to bring you targeted long-term analysis based on fundamental data. Note that our analysis may not take into account the latest announcements from price-sensitive companies or qualitative materials. Simply Wall St has no position in the stocks mentioned.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.