One of the standouts of today's afternoon trading session was Johnson Controls International, which logged a 1.7% performance and outperformed the S&P 500 by 2.0%. The Farm & Heavy Construction Machinery stock is now trading at $55.63 per share and may still have upside potential because it is still -13.14% under its average target price of $64.05. Analysts have set target prices ranging from $54.0 to $75.0 dollars per share, and have given the stock an average rating of buy.
The market seems to share this rosy outlook, since Johnson Controls International has a short interest of only 1.4%. This represents the percentage of the share float that is being shorted, and each short position stands for an investor's expectation that the price of the stock will go down in the future.
When a stock is sold short, it means an investor has borrowed shares of the stock from their broker, and then sold them at the going market price. The investor hopes for the price to decline, so that they might buy those shares back at a lower price in the future. Once they do, they can return the borrowed shares to their broker, and keep the profit they made on the transaction.
One way to get an idea of the market sentiment on a stock is to check its rate of institutional ownership. In the case of Johnson Controls International, institutional investors own 91.4% of the shares. This would indicate a positive sentiment towards the stock among institutions. What does this really tell us?
Institutional investors such as hedge funds, investment firms, and wealth managers devote significant resources to identifying good investments. If they have decided to invest in JCI, it probably means they believe it is a solid investment choice. But it could also mean they are buying up shares in an effort to acquire the company or get seats on the board of directors. Also bear in mind that institutions are fallible (just maybe not quite as fallible as the average retail investor), so they may simply be wrong when they think they've found a good stock.
Overall, there is mixed market sentiment on Johnson Controls International because its an analyst consensus of some upside potential, a buy rating, a very low short interest, and a significant number of institutional investors. Warren Buffett famously said that in the short term, markets are voting mechanisms, but in the long term, they are weighing mechanisms. This means that long term investors should be aware of a stock's fundamentals before committing.
Buffett was one of the fist investors to focus on free cash flow as a yardstick for a company's health. Here are JCI's recent cash flows:
| Date Reported | Cash Flow from Operations ($ k) | Capital expenditures ($ k) | Free Cash Flow ($ k) | YoY Growth (%) |
|---|---|---|---|---|
| 2023 | 2,010,000 | 528,000 | 1,482,000 | 6.01 |
| 2022 | 1,990,000 | 592,000 | 1,398,000 | -30.07 |
| 2021 | 2,551,000 | 552,000 | 1,999,000 | -1.82 |
| 2020 | 2,479,000 | 443,000 | 2,036,000 | 75.97 |
| 2019 | 1,743,000 | 586,000 | 1,157,000 | -38.06 |
| 2018 | 2,513,000 | 645,000 | 1,868,000 |
