Institutional owners may take dramatic actions as Home Reit Plc's (LON:HOME) recent 28% drop adds to one-year losses
Every investor in Home Reit Plc (LON:HOME) should be aware of the most powerful shareholder groups. We can see that institutions own the lion's share in the company with 78% ownership. That is, the group stands to benefit the most if the stock rises (or lose the most if there is a downturn).
And institutional investors saw their holdings value drop by 28% last week. Needless to say, the recent loss which further adds to the one-year loss to shareholders of 49% might not go down well especially with this category of shareholders. Often called “market makers”, institutions wield significant power in influencing the price dynamics of any stock. Hence, if weakness in Home Reit's share price continues, institutional investors may feel compelled to sell the stock, which might not be ideal for individual investors.
In the chart below, we zoom in on the different ownership groups of Home Reit.
View our latest analysis for Home Reit
What Does The Institutional Ownership Tell Us About Home Reit?
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.
Home Reit 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. 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 Home Reit's historic earnings and revenue below, but keep in mind there's always more to the story.
Since institutional investors own more than half the issued stock, the board will likely have to pay attention to their preferences. Hedge funds don't have many shares in Home Reit. The company's largest shareholder is BlackRock, Inc., with ownership of 9.9%. In comparison, the second and third largest shareholders hold about 6.5% and 5.2% of the stock.
After doing some more digging, we found that the top 15 have the combined ownership of 50% in the company, suggesting that no single shareholder has significant control over the company.
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. We're not picking up on any analyst coverage of the stock at the moment, so the company is unlikely to be widely held.
Insider Ownership Of Home Reit
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 Home Reit Plc insiders own under 1% of the company. It has a market capitalization of just UK£441m, and the board has only UK£84k worth of shares in their own names. Many tend to prefer to see a board with bigger shareholdings. A good next step might be to take a look at this free summary of insider buying and selling.
General Public Ownership
The general public, who are usually individual investors, hold a 22% stake in Home Reit. 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.
It's always worth thinking about the different groups who own shares in a company. But to understand Home Reit better, we need to consider many other factors. Consider risks, for instance. Every company has them, and we've spotted 5 warning signs for Home Reit you should know about.
Of course this may not be the best stock to buy. Therefore, you may wish to see our free collection of interesting prospects boasting favorable financials.
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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