To get a sense of who is truly in control of Otis Worldwide Corporation (NYSE:OTIS), it is important to understand the ownership structure of the business. With 86% stake, institutions possess the maximum shares in the company. Put another way, the group faces the maximum upside potential (or downside risk).
And institutional investors saw their holdings value drop by 3.0% last week. Needless to say, the recent loss which further adds to the one-year loss to shareholders of 22% might not go down well especially with this category of shareholders. Often called “market makers”, institutions wield significant power in influencing the price dynamics of any stock. As a result, if the downtrend continues, institutions may face pressures to sell Otis Worldwide, which might have negative implications on individual investors.
Let's take a closer look to see what the different types of shareholders can tell us about Otis Worldwide.
What Does The Institutional Ownership Tell Us About Otis Worldwide?
Many institutions measure their performance against an index that approximates the local market. So they usually pay more attention to companies that are included in major indices.
Otis Worldwide already has institutions on the share registry. Indeed, they own a respectable stake in the company. This can indicate that the company has a certain degree of credibility in the investment community. However, it is best to be wary of relying on the supposed validation that comes with institutional investors. They too, get it wrong sometimes. 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 Otis Worldwide's historic earnings and revenue below, but keep in mind there's always more to the story.
Institutional investors own over 50% of the company, so together than can probably strongly influence board decisions. We note that hedge funds don't have a meaningful investment in Otis Worldwide. Our data shows that The Vanguard Group, Inc. is the largest shareholder with 9.4% of shares outstanding. For context, the second largest shareholder holds about 8.5% of the shares outstanding, followed by an ownership of 3.8% by the third-largest shareholder.
A closer look at our ownership figures suggests that the top 24 shareholders have a combined ownership of 51% 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 Otis Worldwide
The definition of an insider can differ slightly between different countries, but members of the board of directors always count. Company management run the business, but the CEO will answer to the board, even if he or she is a member of it.
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 most recent data indicates that insiders own less than 1% of Otis Worldwide Corporation. 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$13m worth of shares (at current prices). 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 14% ownership, the general public, mostly comprising of individual investors, have some degree of sway over Otis Worldwide. 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 4 warning signs for Otis Worldwide (1 is concerning!) that you should be aware of before investing here.
But ultimately it is the future, not the past, that will determine how well the owners of this business will do. Therefore we think it advisable to take a look at this free report showing whether analysts are predicting a brighter 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.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
