Key Insights
-
Significantly high institutional ownership implies Grafton Group’s stock price is sensitive to their trading actions
-
53% of the business is held by the top 9 shareholders
-
11% of Grafton Group is held by insiders
Every investor in Grafton Group plc (LON:GFTU) should be aware of the most powerful shareholder groups. We can see that institutions own the lion’s share in the company with 72% ownership. Put another way, the group faces the maximum upside potential (or downside risk).
Institutional investors endured the highest losses after the company’s market cap fell by UK£72m last week. However, the 4.5% 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.
Let’s delve deeper into each type of owner of Grafton Group, beginning with the chart below.
See our latest analysis for Grafton Group
What Does The Institutional Ownership Tell Us About Grafton Group?
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 Grafton Group does have institutional investors; and they hold a good portion of the company’s stock. This can indicate that the company has a certain degree of credibility in the investment community. However, it is best to be wary of relying on the supposed validation that comes with institutional investors. They too, get it wrong sometimes. 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 Grafton Group’s earnings history below. Of course, the future is what really matters.
Investors should note that institutions actually own more than half the company, so they can collectively wield significant power. Grafton Group is not owned by hedge funds. Michael Chadwick is currently the company’s largest shareholder with 10% of shares outstanding. In comparison, the second and third largest shareholders hold about 8.8% and 8.5% of the stock.
We did some more digging and found that 9 of the top shareholders account for roughly 53% of the register, implying that along with larger shareholders, there are a few smaller shareholders, thereby balancing out each others interests somewhat.
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. Quite a few analysts cover the stock, so you could look into forecast growth quite easily.
Insider Ownership Of Grafton Group
While the precise definition of an insider can be subjective, almost everyone considers board members to be insiders. 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.
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 Grafton Group plc. It is very interesting to see that insiders have a meaningful UK£187m stake in this UK£1.8b business. 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
The general public, who are usually individual investors, hold a 17% stake in Grafton Group. This size of ownership, while considerable, may not be enough to change company policy if the decision is not in sync with other large shareholders.
Next Steps:
While it is well worth considering the different groups that own a company, there are other factors that are even more important. To that end, you should be aware of the 1 warning sign we’ve spotted with Grafton Group .
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.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.
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.
Join A Paid User Research Session
You’ll receive a US$30 Amazon Gift card for 1 hour of your time while helping us build better investing tools for the individual investors like yourself. Sign up here