Key Insights

• Given the large stake in the stock by institutions, International Business Machines' stock price might be vulnerable to their trading decisions
• The top 25 shareholders own 41% of the company
• Using data from analyst forecasts alongside ownership research, one can better assess the future performance of a company

Every investor in International Business Machines Corporation (NYSE:IBM) should be aware of the most powerful shareholder groups. We can see that institutions own the lion's share in the company with 63% ownership. In other words, the group stands to gain the most (or lose the most) from their investment into the company.

Last week’s 3.5% gain means that institutional investors were on the positive end of the spectrum even as the company has shown strong longer-term trends. The one-year return on investment is currently 44% and last week's gain would have been more than welcomed.

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

Check out our latest analysis for International Business Machines

What Does The Institutional Ownership Tell Us About International Business Machines?

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 International Business Machines does have institutional investors; and they hold a good portion of the company's stock. 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 International Business Machines, (below). Of course, keep in mind that there are other factors to consider, too.

Since institutional investors own more than half the issued stock, the board will likely have to pay attention to their preferences. International Business Machines is not owned by hedge funds. Our data shows that The Vanguard Group, Inc. is the largest shareholder with 10% of shares outstanding. With 8.5% and 6.0% of the shares outstanding respectively, BlackRock, Inc. and State Street Global Advisors, Inc. are the second and third largest shareholders.

A deeper look at our ownership data shows that the top 25 shareholders collectively hold less than half of the register, suggesting a large group of small holders where no single shareholder has a majority.

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. Quite a few analysts cover the stock, so you could look into forecast growth quite easily.

Insider Ownership Of International Business Machines

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.

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 International Business Machines Corporation 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$259m worth of shares. It is good to see board members owning shares, but it might be worth checking if those insiders have been buying.

General Public Ownership

With a 37% ownership, the general public, mostly comprising of individual investors, have some degree of sway over International Business Machines. 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 International Business Machines better, we need to consider many other factors. For instance, we've identified 3 warning signs for International Business Machines that you should be aware of.

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.

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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.