Key Insights

• Institutions' substantial holdings in Wells Fargo implies that they have significant influence over the company's share price
• The top 22 shareholders own 50% of the company
• Analyst forecasts along with ownership data serve to give a strong idea about prospects for a business

A look at the shareholders of Wells Fargo & Company (NYSE:WFC) can tell us which group is most powerful. The group holding the most number of shares in the company, around 77% to be precise, is institutions. Put another way, the group faces the maximum upside potential (or downside risk).

And things are looking up for institutional investors after the company gained US$8.5b in market cap last week. One-year return to shareholders is currently 39% and last week's gain was the icing on the cake.

In the chart below, we zoom in on the different ownership groups of Wells Fargo.

What Does The Institutional Ownership Tell Us About Wells Fargo?

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.

Wells Fargo 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. If multiple institutions change their view on a stock at the same time, you could see the share price drop fast. It's therefore worth looking at Wells Fargo's earnings history below. Of course, the future is what really matters.

Investors should note that institutions actually own more than half the company, so they can collectively wield significant power. Wells Fargo is not owned by hedge funds. The Vanguard Group, Inc. is currently the largest shareholder, with 9.1% of shares outstanding. BlackRock, Inc. is the second largest shareholder owning 7.5% of common stock, and FMR LLC holds about 4.4% of the company stock.

Looking at the shareholder registry, we can see that 50% of the ownership is controlled by the top 22 shareholders, meaning that no single shareholder has a majority interest in the ownership.

While studying institutional ownership for a company can add value to your research, it is also a good practice to research analyst recommendations to get a deeper understand of a stock's expected performance. Quite a few analysts cover the stock, so you could look into forecast growth quite easily.

Insider Ownership Of Wells Fargo

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 Wells Fargo & Company 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$205m worth of shares (at current prices). It is good to see board members owning shares, but it might be worth checking if those insiders have been buying.

General Public Ownership

The general public-- including retail investors -- own 23% stake in the company, and hence can't easily be ignored. 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:

It's always worth thinking about the different groups who own shares in a company. But to understand Wells Fargo better, we need to consider many other factors. To that end, you should be aware of the 1 warning sign we've spotted with Wells Fargo .

But ultimately it is the future, not the past, that will determine how well the owners of this business will do. Therefore we think it advisable to take a look at this free report showing whether analysts are predicting a brighter 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.