Great week for Churchill Downs Incorporated (NASDAQ:CHDN) institutional investors after losing 19% over the previous year
Key Insights
- Given the large stake in the stock by institutions, Churchill Downs' stock price might be vulnerable to their trading decisions
- A total of 17 investors have a majority stake in the company with 51% ownership
- Using data from analyst forecasts alongside ownership research, one can better assess the future performance of a company
Every investor in Churchill Downs Incorporated (NASDAQ:CHDN) should be aware of the most powerful shareholder groups. We can see that institutions own the lion's share in the company with 78% ownership. In other words, the group stands to gain the most (or lose the most) from their investment into the company.
Last week's US$237m market cap gain would probably be appreciated by institutional investors, especially after a year of 19% losses.
Let's take a closer look to see what the different types of shareholders can tell us about Churchill Downs.
See our latest analysis for Churchill Downs
What Does The Institutional Ownership Tell Us About Churchill Downs?
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.
Churchill Downs 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 Churchill Downs' 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. Hedge funds don't have many shares in Churchill Downs. BlackRock, Inc. is currently the largest shareholder, with 9.1% of shares outstanding. In comparison, the second and third largest shareholders hold about 9.1% and 4.4% of the stock. Additionally, the company's CEO William Carstanjen directly holds 2.4% of the total shares outstanding.
Looking at the shareholder registry, we can see that 51% of the ownership is controlled by the top 17 shareholders, meaning that no single shareholder has a majority interest in the ownership.
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 Churchill Downs
While the precise definition of an insider can be subjective, almost everyone considers board members to be insiders. Management ultimately answers to the board. However, it is not uncommon for managers to be executive board members, especially if they are a founder or the CEO.
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 some shares in Churchill Downs Incorporated. It is a pretty big company, so it is generally a positive to see some potentially meaningful alignment. In this case, they own around US$304m worth of shares (at current prices). If you would like to explore the question of insider alignment, 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 16% stake in Churchill Downs. 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 Churchill Downs better, we need to consider many other factors. Consider risks, for instance. Every company has them, and we've spotted 1 warning sign for Churchill Downs you should know about.
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.
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.