Yahoo Finance Institutional investors in Dis-Chem Pharmacies Limited (JSE:DCP) lost 3.8% last week but have reaped the benefits of longer-term growth
Key Insights
Given the large stake in the stock by institutions, Dis-Chem Pharmacies' stock price might be vulnerable to their trading decisions
A total of 3 investors have a majority stake in the company with 52% ownership
Using data from analyst forecasts alongside ownership research, one can better assess the future performance of a company
Every investor in Dis-Chem Pharmacies Limited (JSE:DCP) should be aware of the most powerful shareholder groups. We can see that institutions own the lion's share in the company with 32% ownership. Put another way, the group faces the maximum upside potential (or downside risk).
Institutional investors was the group most impacted after the company's market cap fell to R29b last week. However, the 43% one-year returns may have helped alleviate their overall losses. They should, however, be mindful of further losses in the future.
In the chart below, we zoom in on the different ownership groups of Dis-Chem Pharmacies.
View our latest analysis for Dis-Chem Pharmacies
What Does The Institutional Ownership Tell Us About Dis-Chem Pharmacies?
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 Dis-Chem Pharmacies 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. 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 Dis-Chem Pharmacies' historic earnings and revenue below, but keep in mind there's always more to the story.
Hedge funds don't have many shares in Dis-Chem Pharmacies. Our data shows that Saltzman Family Trust is the largest shareholder with 25% of shares outstanding. In comparison, the second and third largest shareholders hold about 16% and 11% of the stock. In addition, we found that Rui Morais, the CEO has 1.0% of the shares allocated to their name.
A more detailed study of the shareholder registry showed us that 3 of the top shareholders have a considerable amount of ownership in the company, via their 52% stake.
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 Dis-Chem Pharmacies
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.
Insider ownership is positive when it signals leadership are thinking like the true owners of the company. However, high insider ownership can also give immense power to a small group within the company. This can be negative in some circumstances.
Our most recent data indicates that insiders own some shares in Dis-Chem Pharmacies Limited. It is a pretty big company, so it is generally a positive to see some potentially meaningful alignment. In this case, they own around R2.4b worth of shares (at current prices). It is good to see this level of investment by insiders. You can check here to see if those insiders have been buying recently.
General Public Ownership
With a 13% ownership, the general public, mostly comprising of individual investors, have some degree of sway over Dis-Chem Pharmacies. While this group can't necessarily call the shots, it can certainly have a real influence on how the company is run.
Private Company Ownership
It seems that Private Companies own 30%, of the Dis-Chem Pharmacies stock. 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.
Next Steps:
While it is well worth considering the different groups that own a company, there are other factors that are even more important.
Many find it useful to take an in depth look at how a company has performed in the past. You can access this detailed graph of past earnings, revenue and cash flow.
If you are like me, you may want to think about whether this company will grow or shrink. Luckily, you can check this free report showing analyst forecasts for its 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.
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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.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com
