Eastern Railroad Discussion > CSX: Who are the share owners?

Folks occasionally / often like to take shots at the share owners, and their silly demands for dividends and increases in stock prices.And their ridiculous idea that management works for them. But, who are these guys (and they're almost all white men)?

CSX has about 950,000,000 shares outstanding (held by individuals, pension plans, fund managers, employees, etc).  Multiplied by $47.34, that gives you the "market cap" or what the company is worth on the market. More than many firms, much less than Apple, Google, Exxon, etc. (There are a modest number of additional shares which offset options given to management. These have no value unless the stock price rises to a given threshold, and then they are worth plenty.  Give backs from labor often produce repeated annual gains for the company, which drives up the price of the stock. That's one reason why long term gains often drive the way management negotiates.)

About 71% of those 950 million shares are held by non-natural persons or corporations. Many of these shares are held by fiduciaries, who are required to act solely in the interest of the plan beneficiary. That's a higher standard than most local stock brokers are required to meet, although many local guys try to meet that lofty threshold.

CSX is in the Standard & Poor's 500 stock index. That means that many pension plans, college endowments, mutual funds etc will buy and hold the stock as long as CSX is listed in the index. They aren't flipping the stock or doing high velocity trades in it.  About 71% of CSX stock is held by these typically long term accounts. Management, curiously, owns about 0.2% of the company, that's two tenths of one percent. They cash in their options, and cash out their gains, holding a relatively modest amount of stock. In contrast, many hedge funds and private equity require managers to invest heavily in the success of their company. Sometimes an amount equal to five or ten times their annual pay. That gets everyone on the same page.

Mom and pop investors, employees in their own accounts, non-professional investors, etc own about 28% of CSX.

When CSX creates new stock to satisfy options, or sells newly created stock  to the public, the value and control of existing stock is diminished.  State Street Bank, a 4% owner,  argued that Mantle Ridge wasn't entitled to four - six seats on the board for the minimal number of shares Mantle Ridge owns.  The 71% held by institutions breaks out like this -

Vanguard - 8% of CSX (includes both institutional and mutual funds)
Capital Research - 7%
State Street - 4.4%   (State Street expressed unhappiness about giving stock / cash / seats to somebody who owns about what they own)
Wellington - 4.2%
Fidelity - 3.1%
Black Rock - 2.7%

Good data and analysis. It's a typical result for a Fortune 250 company (CSX is #239) that has been in business for a long time. Well, CSX itself hasn't existed that long but its predecessors did. 

For better or worse, Wall Street has migrated most individual investors to aggregated investment vehicles such as mutual funds, away from holding individual stocks -- although some folks still do that. But even before mutual funds became trendy in the 1960s, institutional investors were the major players on Wall Street. They still are. The person at Vanguard who decides how to vote their CSX shares is very influential.



Edited 1 time(s). Last edit at 02/16/17 04:29 by ctillnc.

Have "passive" investors become so large that they are not passive anymore?  There is a weird loop going on for someone running a fund tied to an index.

ctillnc Wrote:
-------------------------------------------------------
> Good data and analysis. It's a typical result for
> a Fortune 250 company (CSX is #239) that has been
> in business for a long time. Well, CSX itself
> hasn't existed that long but its predecessors
> did. 
>
> For better or worse, Wall Street has migrated most
> individual investors to aggregated investment
> vehicles such as mutual funds, away from holding
> individual stocks -- although some folks still do
> that. But even before mutual funds became trendy
> in the 1960s, institutional investors were the
> major players on Wall Street. They still are. The
> person at Vanguard who decides how to vote their
> CSX shares is very influential.

Bob Wilcox
Charlottesville, VA
My Flickr Shots

I am a small shareholder with several hundred shares which is a drop in the bucket as they say.  I've owned shares in CSX for a long time and overall like most small investors I have been happy with the dividend and the way the company is basically operated, though as a rail enthusiast I am not happy that they will not allow a steam engine to operate on their lines, nor do they want any kind of excursions either because of liability issues, but that's something else.  The big mutual funds, pension funds, hedge funds, etc. will always rule and the rest of us who vote our shares each year have so little to say.  This is how it is in this day and age.  I would truly like to see CSX remain independent as I do not think that another merger of our railroads would be prudent right now.  Let's get the service up to par, let's go after more business, work with the customers right now.  Service is the most important part of their business.
​John in White Marsh, Maryland

The custom has been for passive / index managers to vote along the lines recommended by management, but that has been changing. At a glacial pace.

Issues like divesting from companies that did business in South Africa, or do business in Israel, or manufacture tobacco / weapons / etc have caused some cracks.  The fiduciary rules governing pension fund managers make it hard to weigh anything other than the financial consequences of a vote.

It's not just a question of voting the shares. Large stockholders are more likely to be consulted discreetly when vacancies arise on the board of directors, etc. Officially there are limits imposed by the SEC as to what the board or management can tell one stockholder without telling all stockholders and the market simultaneously. But you can bet that when the designated individual at one of the top stockholders calls the CEO's office, the CEO takes the call. 

Just who cares that they are almost all white men? Just what in the heck does this have to do with ANY conversation, much less this one about stock ownership in a company? I am sick and damn tired of liberals taking cheap shots like this.

DB


Lackawanna484 Wrote:
-------------------------------------------------------
> Folks occasionally / often like to take shots at
> the share owners, and their silly demands for
> dividends and increases in stock prices.And their
> ridiculous idea that management works for them.
> But, who are these guys (and they're almost all
> white men)?
>
> CSX has about 950,000,000 shares outstanding (held
> by individuals, pension plans, fund managers,
> employees, etc).  Multiplied by $47.34, that
> gives you the "market cap" or what the company is
> worth on the market. More than many firms, much
> less than Apple, Google, Exxon, etc. (There are a
> modest number of additional shares which offset
> options given to management. These have no value
> unless the stock price rises to a given threshold,
> and then they are worth plenty.  Give backs from
> labor often produce repeated annual gains for the
> company, which drives up the price of the stock.
> That's one reason why long term gains often drive
> the way management negotiates.)
>
> About 71% of those 950 million shares are held by
> non-natural persons or corporations. Many of these
> shares are held by fiduciaries, who are required
> to act solely in the interest of the plan
> beneficiary. That's a higher standard than most
> local stock brokers are required to meet, although
> many local guys try to meet that lofty threshold.
>
> CSX is in the Standard & Poor's 500 stock index.
> That means that many pension plans, college
> endowments, mutual funds etc will buy and hold the
> stock as long as CSX is listed in the index. They
> aren't flipping the stock or doing high velocity
> trades in it.  About 71% of CSX stock is held by
> these typically long term accounts. Management,
> curiously, owns about 0.2% of the company, that's
> two tenths of one percent. They cash in their
> options, and cash out their gains, holding a
> relatively modest amount of stock. In contrast,
> many hedge funds and private equity require
> managers to invest heavily in the success of their
> company. Sometimes an amount equal to five or ten
> times their annual pay. That gets everyone on the
> same page.
>
> Mom and pop investors, employees in their own
> accounts, non-professional investors, etc own
> about 28% of CSX.
>
> When CSX creates new stock to satisfy options, or
> sells newly created stock  to the public, the
> value and control of existing stock is
> diminished.  State Street Bank, a 4% owner, 
> argued that Mantle Ridge wasn't entitled to four -
> six seats on the board for the minimal number of
> shares Mantle Ridge owns.  The 71% held by
> institutions breaks out like this -
>
> Vanguard - 8% of CSX (includes both institutional
> and mutual funds)
> Capital Research - 7%
> State Street - 4.4%   (State Street expressed
> unhappiness about giving stock / cash / seats to
> somebody who owns about what they own)
> Wellington - 4.2%
> Fidelity - 3.1%
> Black Rock - 2.7%

Posted from Android

I dont think this was a cheap shot at all, but pretty much spells out the stock of CSX in a unique yet effective and understandabe way for someone like me that doesnt own stock in CSX.  Since when did politics and liberaism have anything to do with this thread about CSX Stock?  Me thinks that you were the one with the cheap shot and were covering your own keyster for said shot at Lackawanna484 SALGUY. 

Michael Fair
Royal Oak, MI



Edited 1 time(s). Last edit at 02/16/17 20:46 by bath_wildcat.

Interesting.  At a glance it would appear that the major owners of stock really have no interest in the railroad per se, just in the performance of the stock. So whether or not the railroad performs its duty well isn't nearly as important as dividends.  

And as for the racial makeup of majority owners, I gotta agree that has nothing to do with this, unless the inference is that minorities would do a better job, which I don't see.  Once one gets to that level race matters not, the only color that matters is green...

Cole42 Wrote:
-------------------------------------------------------
> Interesting.  At a glance it would appear that
> the major owners of stock really have no interest
> in the railroad per se, just in the performance of
> the stock. So whether or not the railroad performs
> its duty well isn't nearly as important as
> dividends.  

In general, stock markets function as an allocator of capital and sharer of risk.  Investors make decisions about where they will put their money, and how much risk they want to shoulder for the rewards they expect to receive. A super efficient railroad which makes great use of its employees, has stable / growing business etc and pays a dividend may be more attractive to some investors than a very high risk company engaged in drug research, where there's a high probabilty of zero return. And a low probability of a moon shot.  That trade off will vary based on risk tolerance, age, experience, etc.


>
> And as for the racial makeup of majority owners, I
> gotta agree that has nothing to do with this,
> unless the inference is that minorities would do a
> better job, which I don't see.  Once one gets to
> that level race matters not, the only color that
> matters is green...

There was a time when Jews were actively excluded from US investment banking and corporate boards. When the old white shoe Ivy League firms realized the small, upstart Jewish firms were working harder, getting more business, and making more money, guess what happened?

People who think the same way, share similar backgrounds and frames of reference, etc will likely make decisions in similar ways. And reinforce each others similar biases.  Add in some diversity, and you get a lot wider frame of reference, points of view, new ideas, etc. More ways to make money.

> Interesting.  At a glance it would appear that
> the major owners of stock really have no interest
> in the railroad per se, just in the performance of
> the stock. So whether or not the railroad performs
> its duty well isn't nearly as important as
> dividends.  

I'd state it a little differently. The institutional owners want the value of their holdings to increase, and they want the cash-flow of dividends as well. (Actually there is a trade-off between just those two outcomes). There are several ways that the company can increase the value of its stock in the aggregate. Some of those are purely financial. But one of them is operational, that is by growing revenue and/or reducing costs. The board of directors ultimately has to select the strategies and it's the role of management to execute. Making a better railroad -- one that attracts more business, one that can justify higher rates against the competition, one that is more efficeint in its operations -- is one way to drive enterprise value. But it's just one way. What the institutional owners demand are results. 

I agree 100% ignorant and 100% unneeded.
JW

SALGUY Wrote:
-------------------------------------------------------
> Just who cares that they are almost all white men?
> Just what in the heck does this have to do with
> ANY conversation, much less this one about stock
> ownership in a company? I am sick and damn tired
> of liberals taking cheap shots like this.
>
> DB
>
>
> Lackawanna484 Wrote:
> --------------------------------------------------
> -----
> > Folks occasionally / often like to take shots
> at
> > the share owners, and their silly demands for
> > dividends and increases in stock prices.And
> their
> > ridiculous idea that management works for them.
> > But, who are these guys (and they're almost all
> > white men)?
> >
> > CSX has about 950,000,000 shares outstanding
> (held
> > by individuals, pension plans, fund managers,
> > employees, etc).  Multiplied by $47.34, that
> > gives you the "market cap" or what the company
> is
> > worth on the market. More than many firms, much
> > less than Apple, Google, Exxon, etc. (There are
> a
> > modest number of additional shares which offset
> > options given to management. These have no
> value
> > unless the stock price rises to a given
> threshold,
> > and then they are worth plenty.  Give backs
> from
> > labor often produce repeated annual gains for
> the
> > company, which drives up the price of the
> stock.
> > That's one reason why long term gains often
> drive
> > the way management negotiates.)
> >
> > About 71% of those 950 million shares are held
> by
> > non-natural persons or corporations. Many of
> these
> > shares are held by fiduciaries, who are
> required
> > to act solely in the interest of the plan
> > beneficiary. That's a higher standard than most
> > local stock brokers are required to meet,
> although
> > many local guys try to meet that lofty
> threshold.
> >
> > CSX is in the Standard & Poor's 500 stock
> index.
> > That means that many pension plans, college
> > endowments, mutual funds etc will buy and hold
> the
> > stock as long as CSX is listed in the index.
> They
> > aren't flipping the stock or doing high
> velocity
> > trades in it.  About 71% of CSX stock is held
> by
> > these typically long term accounts. Management,
> > curiously, owns about 0.2% of the company,
> that's
> > two tenths of one percent. They cash in their
> > options, and cash out their gains, holding a
> > relatively modest amount of stock. In contrast,
> > many hedge funds and private equity require
> > managers to invest heavily in the success of
> their
> > company. Sometimes an amount equal to five or
> ten
> > times their annual pay. That gets everyone on
> the
> > same page.
> >
> > Mom and pop investors, employees in their own
> > accounts, non-professional investors, etc own
> > about 28% of CSX.
> >
> > When CSX creates new stock to satisfy options,
> or
> > sells newly created stock  to the public, the
> > value and control of existing stock is
> > diminished.  State Street Bank, a 4% owner, 
> > argued that Mantle Ridge wasn't entitled to four
> -
> > six seats on the board for the minimal number
> of
> > shares Mantle Ridge owns.  The 71% held by
> > institutions breaks out like this -
> >
> > Vanguard - 8% of CSX (includes both
> institutional
> > and mutual funds)
> > Capital Research - 7%
> > State Street - 4.4%   (State Street expressed
> > unhappiness about giving stock / cash / seats
> to
> > somebody who owns about what they own)
> > Wellington - 4.2%
> > Fidelity - 3.1%
> > Black Rock - 2.7%
>
> Posted from Android

Thanks Lackawanna484 for your very informative reply. I've been off TO for a few days, but I appreciate your input and agree  with all of it, despite what others think. 'Margaret' on the Western Board asked a good question about "open access" on railroads (related to FRC flooding) which I and many others responded too. She asked if the Government did want to buy all the railroad franchises how much would it cost? Your example of multiplying outstanding shares by the stock price is good and I knew that anyway. And of course it changes every day. But how do you find out how many shares of each company are outstanding? I own stocks in all the big seven and GWI but i quit getting printed Annual Reports several years ago because they just piled up and I did not want to waste paper. I can get stock prices from my financial advisor. Is it available online? So if CSX is worth $49B, and the other big RR's are about the same, they might be worth even more than 'drumpf' ?? Of course this goverment will not buy any freight railroads just defund Amtrak and other passenger rail. But I thought I might 'PM' this lady and give her a suggestion how to find that number. She said she did research Google and found nothing. You can PM me your answer if you want.