Key Insights

• Significantly high institutional ownership implies Northrop Grumman's stock price is sensitive to their trading actions
• 51% of the business is held by the top 11 shareholders
• Ownership research along with analyst forecasts data help provide a good understanding of opportunities in a stock

A look at the shareholders of Northrop Grumman Corporation (NYSE:NOC) can tell us which group is most powerful. The group holding the most number of shares in the company, around 83% to be precise, is institutions. In other words, the group stands to gain the most (or lose the most) from their investment into the company.

And last week, institutional investors ended up benefitting the most after the company hit US$73b in market cap. The gains from last week would have further boosted the one-year return to shareholders which currently stand at 17%.

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

View our latest analysis for Northrop Grumman

What Does The Institutional Ownership Tell Us About Northrop Grumman?

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.

As you can see, institutional investors have a fair amount of stake in Northrop Grumman. This suggests some credibility amongst professional investors. But we can't rely on that fact alone since institutions make bad investments sometimes, just like everyone does. 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 Northrop Grumman, (below). Of course, keep in mind that there are other factors to consider, too.

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 Northrop Grumman. Our data shows that State Street Global Advisors, Inc. is the largest shareholder with 9.5% of shares outstanding. In comparison, the second and third largest shareholders hold about 8.7% and 7.3% of the stock.

After doing some more digging, we found that the top 11 have the combined ownership of 51% in the company, suggesting that no single shareholder has significant control over the company.

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. There are plenty of analysts covering the stock, so it might be worth seeing what they are forecasting, too.

Insider Ownership Of Northrop Grumman

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.

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 data suggests that insiders own under 1% of Northrop Grumman Corporation in their own names. Being so large, we would not expect insiders to own a large proportion of the stock. Collectively, they own US$128m of stock. In this sort of situation, it can be more interesting to see if those insiders have been buying or selling.

General Public Ownership

The general public, who are usually individual investors, hold a 11% stake in Northrop Grumman. While this group can't necessarily call the shots, it can certainly have a real influence on how the company is run.

Next Steps:

It's always worth thinking about the different groups who own shares in a company. But to understand Northrop Grumman better, we need to consider many other factors. For instance, we've identified 2 warning signs for Northrop Grumman that you should be aware of.

Ultimately the future is most important. You can access this free report on analyst forecasts for the company.

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.