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Could The Fletcher Building Limited (NZSE:FBU) Ownership Structure Tell Us Something Useful?

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·4-min read
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The big shareholder groups in Fletcher Building Limited (NZSE:FBU) have power over the company. Large companies usually have institutions as shareholders, and we usually see insiders owning shares in smaller companies. Companies that used to be publicly owned tend to have lower insider ownership.

Fletcher Building is a pretty big company. It has a market capitalization of NZ$6.2b. 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. Let's delve deeper into each type of owner, to discover more about Fletcher Building.

See our latest analysis for Fletcher Building

ownership-breakdown
ownership-breakdown

What Does The Institutional Ownership Tell Us About Fletcher Building?

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.

We can see that Fletcher Building does have institutional investors; and they hold a good portion of the company's stock. This implies the analysts working for those institutions have looked at the stock and they like it. But just like anyone else, they could be wrong. When multiple institutions own a stock, there's always a risk that they are in a 'crowded trade'. When such a trade goes wrong, multiple parties may compete to sell stock fast. This risk is higher in a company without a history of growth. You can see Fletcher Building's historic earnings and revenue below, but keep in mind there's always more to the story.

earnings-and-revenue-growth
earnings-and-revenue-growth

Hedge funds don't have many shares in Fletcher Building. The company's largest shareholder is Schroder Investment Management Limited, with ownership of 5.8%. With 5.0% and 4.9% of the shares outstanding respectively, BlackRock, Inc. and Perpetual Limited are the second and third largest shareholders.

Our studies suggest that the top 25 shareholders collectively control less than half of the company's shares, meaning that the company's shares are widely disseminated and there is no dominant shareholder.

While it makes sense to study institutional ownership data for a company, it also makes sense to study analyst sentiments to know which way the wind is blowing. There are plenty of analysts covering the stock, so it might be worth seeing what they are forecasting, too.

Insider Ownership Of Fletcher Building

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. 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.

Most consider insider ownership a positive because it can indicate the board is well aligned with other shareholders. However, on some occasions too much power is concentrated within this group.

Our data suggests that insiders own under 1% of Fletcher Building Limited in their own names. It's a big company, so even a small proportional interest can create alignment between the board and shareholders. In this case insiders own NZ$27m worth of shares. It is always good to see at least some insider ownership, but it might be worth checking if those insiders have been selling.

General Public Ownership

The general public collectively holds 57% of Fletcher Building shares. With this amount of ownership, retail investors can collectively play a role in decisions that affect shareholder returns, such as dividend policies and the appointment of directors. They can also exercise the power to vote on acquisitions or mergers that may not improve profitability.

Next Steps:

I find it very interesting to look at who exactly owns a company. But to truly gain insight, we need to consider other information, too. For example, we've discovered 2 warning signs for Fletcher Building that you should be aware of before investing here.

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.

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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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