Yahoo Finance GrainCorp Limited's (ASX:GNC) institutional investors lost 8.3% last week but have benefitted from longer-term gains
To get a sense of who is truly in control of GrainCorp Limited (ASX:GNC), it is important to understand the ownership structure of the business. And the group that holds the biggest piece of the pie are institutions with 54% ownership. In other words, the group stands to gain the most (or lose the most) from their investment into the company.
No shareholder likes losing money on their investments, especially institutional investors who saw their holdings drop 8.3% in value last week. However, the 27% one-year returns may have helped alleviate their overall losses. We would assume however, that they would be on the lookout for weakness in the future.
In the chart below, we zoom in on the different ownership groups of GrainCorp.
See our latest analysis for GrainCorp
What Does The Institutional Ownership Tell Us About GrainCorp?
Institutional investors commonly compare their own returns to the returns of a commonly followed index. So they generally do consider buying larger companies that are included in the relevant benchmark index.
GrainCorp already has institutions on the share registry. Indeed, they own a respectable stake in the company. 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. If multiple institutions change their view on a stock at the same time, you could see the share price drop fast. It's therefore worth looking at GrainCorp's earnings history below. Of course, the future is what really matters.
Since institutional investors own more than half the issued stock, the board will likely have to pay attention to their preferences. We note that hedge funds don't have a meaningful investment in GrainCorp. Looking at our data, we can see that the largest shareholder is State Street Global Advisors, Inc. with 6.6% of shares outstanding. Meanwhile, the second and third largest shareholders, hold 6.2% and 5.1%, of the shares outstanding, respectively.
A closer look at our ownership figures suggests that the top 15 shareholders have a combined ownership of 50% implying that no single shareholder has a majority.
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 a reasonable number of analysts covering the stock, so it might be useful to find out their aggregate view on the future.
Insider Ownership Of GrainCorp
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.
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 most recent data indicates that insiders own less than 1% of GrainCorp Limited. Keep in mind that it's a big company, and the insiders own AU$11m worth of shares. The absolute value might be more important than the proportional share. It is good to see board members owning shares, but it might be worth checking if those insiders have been buying.
General Public Ownership
With a 44% ownership, the general public, mostly comprising of individual investors, have some degree of sway over GrainCorp. 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 GrainCorp better, we need to consider many other factors. Consider for instance, the ever-present spectre of investment risk. We've identified 3 warning signs with GrainCorp (at least 2 which are a bit unpleasant) , and understanding them should be part of your investment process.
Ultimately the future is most important. You can access this free report on analyst forecasts for the company.
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.
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