The big shareholder groups in Reece Limited (ASX:REH) have power over the company. Insiders often own a large chunk of younger, smaller, companies while huge companies tend to have institutions as shareholders. I generally like to see some degree of insider ownership, even if only a little. As Nassim Nicholas Taleb said, 'Don’t tell me what you think, tell me what you have in your portfolio.
Reece has a market capitalization of AU$8.3b, so it's too big to fly under the radar. We'd expect to see both institutions and retail investors owning a portion of the company. Our analysis of the ownership of the company, below, shows that institutions own shares in the company. Let's take a closer look to see what the different types of shareholders can tell us about Reece.
What Does The Institutional Ownership Tell Us About Reece?
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.
We can see that Reece does have institutional investors; and they hold a good portion of the company's stock. 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. 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 Reece's historic earnings and revenue below, but keep in mind there's always more to the story.
Hedge funds don't have many shares in Reece. L.T. Wilson Pty Ltd. is currently the largest shareholder, with 24% of shares outstanding. L.T.W. Holdings Pty. Ltd. is the second largest shareholder owning 9.3% of common stock, and Warramunda Investments Pty. Ltd. holds about 7.5% of the company stock.
To make our study more interesting, we found that the top 5 shareholders control more than half of the company which implies that this group has considerable sway over the company's decision-making.
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 Reece
While the precise definition of an insider can be subjective, almost everyone considers board members to be insiders. 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.
Our information suggests that insiders maintain a significant holding in Reece Limited. Insiders own AU$1.2b worth of shares in the AU$8.3b company. That's quite meaningful. It is good to see this level of investment. You can check here to see if those insiders have been buying recently.
General Public Ownership
With a 18% ownership, the general public have some degree of sway over Reece. 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.
Private Company Ownership
We can see that Private Companies own 56%, of the shares on issue. It's hard to draw any conclusions from this fact alone, so its worth looking into who owns those private companies. Sometimes insiders or other related parties have an interest in shares in a public company through a separate private company.
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. Consider for instance, the ever-present spectre of investment risk. We've identified 3 warning signs with Reece , 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.
This article by Simply Wall St is general in nature. 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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