Key Insights

• Institutions' substantial holdings in Eaton implies that they have significant influence over the company's share price
• A total of 24 investors have a majority stake in the company with 51% ownership
• Insiders have sold recently

A look at the shareholders of Eaton Corporation plc (NYSE:ETN) can tell us which group is most powerful. And the group that holds the biggest piece of the pie are institutions with 83% ownership. Put another way, the group faces the maximum upside potential (or downside risk).

And last week, institutional investors ended up benefitting the most after the company hit US$138b in market cap. The one-year return on investment is currently 45% and last week's gain would have been more than welcomed.

Let's delve deeper into each type of owner of Eaton, beginning with the chart below.

View our latest analysis for Eaton

What Does The Institutional Ownership Tell Us About Eaton?

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.

We can see that Eaton 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 Eaton's 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. Hedge funds don't have many shares in Eaton. Our data shows that The Vanguard Group, Inc. is the largest shareholder with 9.4% of shares outstanding. In comparison, the second and third largest shareholders hold about 7.4% and 4.2% of the stock.

After doing some more digging, we found that the top 24 have the combined ownership of 51% in the company, suggesting that no single shareholder has significant control over the company.

Researching institutional ownership is a good way to gauge and filter a stock's expected performance. The same can be achieved by studying analyst sentiments. 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 Eaton

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.

Our data suggests that insiders own under 1% of Eaton Corporation plc in their own names. 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$264m 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 16% ownership, the general public, mostly comprising of individual investors, have some degree of sway over Eaton. While this group can't necessarily call the shots, it can certainly have a real influence on how the company is run.

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. Consider for instance, the ever-present spectre of investment risk. We've identified 1 warning sign with Eaton , and understanding them should be part of your investment process.

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.