Yahoo Finance Institutional investors have a lot riding on Exxaro Resources Limited (JSE:EXX) with 47% ownership
Key Insights
Institutions' substantial holdings in Exxaro Resources implies that they have significant influence over the company's share price
The top 5 shareholders own 51% of the company
Analyst forecasts along with ownership data serve to give a strong idea about prospects for a business
Every investor in Exxaro Resources Limited (JSE:EXX) should be aware of the most powerful shareholder groups. With 47% stake, institutions possess the maximum shares in the company. Put another way, the group faces the maximum upside potential (or downside risk).
And things are looking up for institutional investors after the company gained R4.0b in market cap last week. The gains from last week would have further boosted the one-year return to shareholders which currently stand at 33%.
Let's take a closer look to see what the different types of shareholders can tell us about Exxaro Resources.
Check out our latest analysis for Exxaro Resources
What Does The Institutional Ownership Tell Us About Exxaro Resources?
Many institutions measure their performance against an index that approximates the local market. So they usually pay more attention to companies that are included in major indices.
Exxaro Resources already has institutions on the share registry. Indeed, they own a respectable stake in the company. 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. It is not uncommon to see a big share price drop if two large institutional investors try to sell out of a stock at the same time. So it is worth checking the past earnings trajectory of Exxaro Resources, (below). Of course, keep in mind that there are other factors to consider, too.
Hedge funds don't have many shares in Exxaro Resources. Public Investment Corporation Limited is currently the largest shareholder, with 22% of shares outstanding. For context, the second largest shareholder holds about 12% of the shares outstanding, followed by an ownership of 9.3% by the third-largest shareholder.
Our research also brought to light the fact that roughly 51% of the company is controlled by the top 5 shareholders suggesting that these owners wield significant influence on the business.
Researching institutional ownership is a good way to gauge and filter a stock's expected performance. The same can be achieved by studying analyst sentiments. There are plenty of analysts covering the stock, so it might be worth seeing what they are forecasting, too.
Insider Ownership Of Exxaro Resources
While the precise definition of an insider can be subjective, almost everyone considers board members to be insiders. 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.
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 Exxaro Resources Limited insiders own under 1% of the company. It is a pretty big company, so it would be possible for board members to own a meaningful interest in the company, without owning much of a proportional interest. In this case, they own around R41m worth of shares (at current prices). 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 31% ownership, the general public, mostly comprising of individual investors, have some degree of sway over Exxaro Resources. 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. For instance, we've identified 2 warning signs for Exxaro Resources (1 is significant) that you should be aware of.
But ultimately it is the future, not the past, that will determine how well the owners of this business will do. Therefore we think it advisable to take a look at this free report showing whether analysts are predicting a brighter future.
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.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com
