With 86% ownership of the shares, The Hershey Company (NYSE:HSY) is heavily dominated by institutional owners

Key Insights

• Given the large stake in the stock by institutions, Hershey's stock price might be vulnerable to their trading decisions

• The top 8 shareholders own 51% of the company

• Analyst forecasts along with ownership data serve to give a strong idea about prospects for a business

To get a sense of who is truly in control of The Hershey Company (NYSE:HSY), it is important to understand the ownership structure of the business. We can see that institutions own the lion's share in the company with 86% ownership. Put another way, the group faces the maximum upside potential (or downside risk).

Because institutional owners have a huge pool of resources and liquidity, their investing decisions tend to carry a great deal of weight, especially with individual investors. As a result, a sizeable amount of institutional money invested in a firm is generally viewed as a positive attribute.

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

View our latest analysis for Hershey

What Does The Institutional Ownership Tell Us About Hershey?

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.

Hershey 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. 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 Hershey, (below). Of course, keep in mind that there are other factors to consider, too.

Institutional investors own over 50% of the company, so together than can probably strongly influence board decisions. Hedge funds don't have many shares in Hershey. Our data shows that Milton Hershey School Trust is the largest shareholder with 28% of shares outstanding. In comparison, the second and third largest shareholders hold about 7.4% and 7.2% of the stock.

We also observed that the top 8 shareholders account for more than half of the share register, with a few smaller shareholders to balance the interests of the larger ones to a certain extent.

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

Insider Ownership Of Hershey

The definition of company insiders can be subjective and does vary between jurisdictions. Our data reflects individual insiders, capturing board members at the very least. 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.

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 most recent data indicates that insiders own less than 1% of The Hershey Company. As it is a large company, we'd only expect insiders to own a small percentage of it. But it's worth noting that they own US$57m worth of shares. 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, who are usually individual investors, hold a 14% stake in Hershey. 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 Hershey better, we need to consider many other factors. Consider risks, for instance. Every company has them, and we've spotted 1 warning sign for Hershey 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.

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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.