Institutional owners may take dramatic actions as American Express Company’s (NYSE:AXP) recent 6.9% drop adds to one-year losses
Institutional owners may take dramatic actions as American Express Company’s (NYSE:AXP) recent 6.9% drop adds to one-year losses
Every investor in American Express Company (NYSE:AXP) should be aware of the most powerful shareholder groups. With 66% stake, institutions possess the maximum shares in the company. In other words, the group stands to gain the most (or lose the most) from their investment into the company.
And so it follows that institutional investors was the group most impacted after the company’s market cap fell to US$113b last week after a 6.9% drop in the share price. The recent loss, which adds to a one-year loss of 5.7% for stockholders, may not sit well with this group of investors. Often called “market makers”, institutions wield significant power in influencing the price dynamics of any stock. As a result, if the downtrend continues, institutions may face pressures to sell American Express, which might have negative implications on individual investors.
Let’s take a closer look to see what the different types of shareholders can tell us about American Express.
Before we look at the ownership breakdown, you might like to know that our analysis indicates that AXP is potentially undervalued!
What Does The Institutional Ownership Tell Us About American Express?
Many institutions measure their performance against an index that approximates the local market. So they usually pay more attention to companies that are included in major indices.
We can see that American Express 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. 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 American Express, (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. We note that hedge funds don’t have a meaningful investment in American Express. Looking at our data, we can see that the largest shareholder is Berkshire Hathaway Inc. with 20% of shares outstanding. For context, the second largest shareholder holds about 6.3% of the shares outstanding, followed by an ownership of 5.9% by the third-largest shareholder.
A closer look at our ownership figures suggests that the top 13 shareholders have a combined ownership of 51% implying that 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. 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 American Express
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.
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 American Express Company insiders own under 1% of the company. 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$130m worth of shares (at current prices). In this sort of situation, it can be more interesting to see if those insiders have been buying or selling.
General Public Ownership
With a 14% ownership, the general public, mostly comprising of individual investors, have some degree of sway over American Express. 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.
Public Company Ownership
Public companies currently own 20% of American Express stock. This may be a strategic interest and the two companies may have related business interests. It could be that they have de-merged. This holding is probably worth investigating further.
Next Steps:
It’s always worth thinking about the different groups who own shares in a company. But to understand American Express better, we need to consider many other factors. Consider risks, for instance. Every company has them, and we’ve spotted 2 warning signs for American Express you should know about.
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.
Discounted cash flow calculation for every stock
Simply Wall St does a detailed discounted cash flow calculation every 6 hours for every stock on the market, so if you want to find the intrinsic value of any company just search here. It’s FREE.
Make Confident Investment Decisions
Simply Wall St’s Editorial Team provides unbiased, factual reporting on global stocks using in-depth fundamental analysis.
Find out more about our editorial guidelines and team.
About NYSE:AXP
American Express
American Express Company, together with its subsidiaries, provides charge and credit payment card products, and travel-related services worldwide.
The Snowflake is a visual investment summary with the score of each axis being calculated by 6 checks in 5 areas.
Read more about these checks in the individual report sections or in our analysis model.