Key Insights

• Significantly high institutional ownership implies O'Reilly Automotive's stock price is sensitive to their trading actions
• A total of 25 investors have a majority stake in the company with 50% ownership
• Insiders have been selling lately

A look at the shareholders of O'Reilly Automotive, Inc. (NASDAQ:ORLY) can tell us which group is most powerful. And the group that holds the biggest piece of the pie are institutions with 87% ownership. Put another way, the group faces the maximum upside potential (or downside risk).

Given the vast amount of money and research capacities at their disposal, institutional ownership tends to carry a lot of weight, especially with individual investors. Hence, having a considerable amount of institutional money invested in a company is often regarded as a desirable trait.

In the chart below, we zoom in on the different ownership groups of O'Reilly Automotive.

What Does The Institutional Ownership Tell Us About O'Reilly Automotive?

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.

O'Reilly Automotive 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 O'Reilly Automotive's historic earnings and revenue below, but keep in mind there's always more to the story.

Investors should note that institutions actually own more than half the company, so they can collectively wield significant power. O'Reilly Automotive is not owned by hedge funds. Looking at our data, we can see that the largest shareholder is The Vanguard Group, Inc. with 8.6% of shares outstanding. Meanwhile, the second and third largest shareholders, hold 7.0% and 4.1%, of the shares outstanding, respectively.

On studying our ownership data, we found that 25 of the top shareholders collectively own less than 50% of the share register, implying that no single individual has a majority interest.

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 O'Reilly Automotive

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.

I generally consider insider ownership to be a good thing. However, on some occasions it makes it more difficult for other shareholders to hold the board accountable for decisions.

Our information suggests that O'Reilly Automotive, Inc. insiders own under 1% of the company. Being so large, we would not expect insiders to own a large proportion of the stock. Collectively, they own US$522m of stock. 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

The general public, who are usually individual investors, hold a 12% stake in O'Reilly Automotive. 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 O'Reilly Automotive better, we need to consider many other factors. Be aware that O'Reilly Automotive is showing 3 warning signs in our investment analysis , and 1 of those shouldn't be ignored...

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.