Key Insights

• Given the large stake in the stock by institutions, D.R. Horton's stock price might be vulnerable to their trading decisions
• 51% of the business is held by the top 19 shareholders
• Ownership research along with analyst forecasts data help provide a good understanding of opportunities in a stock

Every investor in D.R. Horton, Inc. (NYSE:DHI) should be aware of the most powerful shareholder groups. And the group that holds the biggest piece of the pie are institutions with 80% ownership. That is, the group stands to benefit the most if the stock rises (or lose the most if there is a downturn).

And last week, institutional investors ended up benefitting the most after the company hit US$58b in market cap. One-year return to shareholders is currently 55% and last week's gain was the icing on the cake.

In the chart below, we zoom in on the different ownership groups of D.R. Horton.

What Does The Institutional Ownership Tell Us About D.R. Horton?

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.

As you can see, institutional investors have a fair amount of stake in D.R. Horton. 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 D.R. Horton, (below). Of course, keep in mind that there are other factors to consider, too.

Investors should note that institutions actually own more than half the company, so they can collectively wield significant power. D.R. Horton is not owned by hedge funds. Our data shows that The Vanguard Group, Inc. is the largest shareholder with 11% of shares outstanding. In comparison, the second and third largest shareholders hold about 10% and 7.6% of the stock.

Looking at the shareholder registry, we can see that 51% of the ownership is controlled by the top 19 shareholders, meaning that no single shareholder has a majority interest in the ownership.

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

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 D.R. Horton, 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$557m worth of shares. It is always good to see at least some insider ownership, but it might be worth checking if those insiders have been selling.

General Public Ownership

With a 18% ownership, the general public, mostly comprising of individual investors, have some degree of sway over D.R. Horton. 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:

I find it very interesting to look at who exactly owns a company. But to truly gain insight, we need to consider other information, too.

Many find it useful to take an in depth look at how a company has performed in the past. You can access this detailed graph of past earnings, revenue and cash flow.

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.

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.