Key Insights

• Given the large stake in the stock by institutions, Hershey's stock price might be vulnerable to their trading decisions
• The top 5 shareholders own 52% of the company
• Ownership research along with analyst forecasts data help provide a good understanding of opportunities in a stock

A look at the shareholders of The Hershey Company (NYSE:HSY) can tell us which group is most powerful. We can see that institutions own the lion's share in the company with 89% ownership. In other words, the group stands to gain the most (or lose the most) from their investment into the company.

After a year of 1.7% losses, last week's 3.6% gain would be welcomed by institutional investors as a possible sign that returns might start trending higher.

Let's take a closer look to see what the different types of shareholders can tell us about Hershey.

What Does The Institutional Ownership Tell Us About Hershey?

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 Hershey 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. 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 Hershey'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. Hershey is not owned by hedge funds. Milton Hershey School Trust is currently the largest shareholder, with 28% of shares outstanding. Meanwhile, the second and third largest shareholders, hold 9.6% and 6.1%, of the shares outstanding, respectively.

Our research also brought to light the fact that roughly 52% of the company is controlled by the top 5 shareholders suggesting that these owners wield significant influence on the business.

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 Hershey

While the precise definition of an insider can be subjective, almost everyone considers board members to be insiders. 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 most recent data indicates that insiders own less than 1% of The Hershey Company. Being so large, we would not expect insiders to own a large proportion of the stock. Collectively, they own US$73m of stock. 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

The general public, who are usually individual investors, hold a 10% stake in Hershey. 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:

While it is well worth considering the different groups that own a company, there are other factors that are even more important. Case in point: We've spotted 1 warning sign for Hershey you should be aware of.

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.

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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.