If you want to know who really controls The Wendy’s Company (NASDAQ:WEN), then you’ll have to look at the makeup of its share registry. Generally speaking, as a company grows, institutions will increase their ownership. Conversely, insiders often decrease their ownership over time. I quite like to see at least a little bit of insider ownership. As Charlie Munger said ‘Show me the incentive and I will show you the outcome.
Wendy’s is a pretty big company. It has a market capitalization of US$5.1b. Normally institutions would own a significant portion of a company this size. Taking a look at our data on the ownership groups (below), it seems that institutions own shares in the company. We can zoom in on the different ownership groups, to learn more about Wendy’s.
What Does The Institutional Ownership Tell Us About Wendy’s?
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.
As you can see, institutional investors have a fair amount of stake in Wendy’s. 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 Wendy’s, (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. Our data indicates that hedge funds own 11% of Wendy’s. That catches my attention because hedge funds sometimes try to influence management, or bring about changes that will create near term value for shareholders. The company’s largest shareholder is Trian Fund Management, L.P., with ownership of 11%. With 8.2% and 7.3% of the shares outstanding respectively, The Vanguard Group, Inc. and BlackRock, Inc. are the second and third largest shareholders.
After doing some more digging, we found that the top 12 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 Wendy’s
The definition of an insider can differ slightly between different countries, but members of the board of directors always count. 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.
Shareholders would probably be interested to learn that insiders own shares in The Wendy’s Company. The insiders have a meaningful stake worth US$407m. Most would see this as a real positive. Most would say this shows alignment of interests between shareholders and the board. Still, it might be worth checking if those insiders have been selling.
General Public Ownership
The general public, who are usually individual investors, hold a 20% stake in Wendy’s. While this group can’t necessarily call the shots, it can certainly have a real influence on how the company is run.
It’s always worth thinking about the different groups who own shares in a company. But to understand Wendy’s better, we need to consider many other factors. Case in point: We’ve spotted 2 warning signs for Wendy’s you should be aware of, and 1 of them makes us a bit uncomfortable.
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.
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