Key Insights

• Given the large stake in the stock by institutions, Smith & Wesson Brands' stock price might be vulnerable to their trading decisions
• A total of 15 investors have a majority stake in the company with 50% ownership
• Ownership research, combined with past performance data can help provide a good understanding of opportunities in a stock

If you want to know who really controls Smith & Wesson Brands, Inc. (NASDAQ:SWBI), then you'll have to look at the makeup of its share registry. The group holding the most number of shares in the company, around 54% to be precise, is institutions. Put another way, the group faces the maximum upside potential (or downside risk).

Institutional investors endured the highest losses after the company's market cap fell by US$77m last week. However, the 9.5% one-year returns may have helped alleviate their overall losses. But they would probably be wary of future losses.

In the chart below, we zoom in on the different ownership groups of Smith & Wesson Brands.

What Does The Institutional Ownership Tell Us About Smith & Wesson Brands?

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.

We can see that Smith & Wesson Brands does have institutional investors; and they hold a good portion of the company's stock. 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 Smith & Wesson Brands' historic earnings and revenue below, but keep in mind there's always more to the story.

Since institutional investors own more than half the issued stock, the board will likely have to pay attention to their preferences. It would appear that 6.0% of Smith & Wesson Brands shares are controlled by hedge funds. That's interesting, because hedge funds can be quite active and activist. Many look for medium term catalysts that will drive the share price higher. Looking at our data, we can see that the largest shareholder is BlackRock, Inc. with 9.3% of shares outstanding. Meanwhile, the second and third largest shareholders, hold 7.9% and 6.6%, of the shares outstanding, respectively.

A closer look at our ownership figures suggests that the top 15 shareholders have a combined ownership of 50% 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 is some analyst coverage of the stock, but it could still become more well known, with time.

Insider Ownership Of Smith & Wesson Brands

The definition of company insiders can be subjective and does vary between jurisdictions. Our data reflects individual insiders, capturing board members at the very least. Management ultimately answers to the board. However, it is not uncommon for managers to be executive board members, especially if they are a founder or the CEO.

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 Smith & Wesson Brands, Inc.. It has a market capitalization of just US$747m, and insiders have US$10m worth of shares, in their own names. Some would say this shows alignment of interests between shareholders and the board. But it might be worth checking if those insiders have been selling.

General Public Ownership

With a 38% ownership, the general public, mostly comprising of individual investors, have some degree of sway over Smith & Wesson Brands. 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.

Next Steps:

It's always worth thinking about the different groups who own shares in a company. But to understand Smith & Wesson Brands better, we need to consider many other factors. For example, we've discovered 1 warning sign for Smith & Wesson Brands that you should be aware of before investing here.

If you would prefer discover what analysts are predicting in terms of future growth, do not miss this free report on analyst forecasts.

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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.
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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com