A great week that adds to Starwood Property Trust, Inc.'s (NYSE:STWD) one-year returns, institutional investors who own 52% must be happy
Key Insights
Given the large stake in the stock by institutions, Starwood Property Trust's stock price might be vulnerable to their trading decisions
The top 25 shareholders own 43% of the company
Using data from analyst forecasts alongside ownership research, one can better assess the future performance of a company
To get a sense of who is truly in control of Starwood Property Trust, Inc. (NYSE:STWD), it is important to understand the ownership structure of the business. We can see that institutions own the lion's share in the company with 52% ownership. Put another way, the group faces the maximum upside potential (or downside risk).
And last week, institutional investors ended up benefitting the most after the company hit US$6.3b in market cap. The gains from last week would have further boosted the one-year return to shareholders which currently stand at 4.5%.
Let's delve deeper into each type of owner of Starwood Property Trust, beginning with the chart below.
View our latest analysis for Starwood Property Trust
What Does The Institutional Ownership Tell Us About Starwood Property Trust?
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.
As you can see, institutional investors have a fair amount of stake in Starwood Property Trust. 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 Starwood Property Trust's historic earnings and revenue below, but keep in mind there's always more to the story.
Investors should note that institutions actually own more than half the company, so they can collectively wield significant power. Hedge funds don't have many shares in Starwood Property Trust. Looking at our data, we can see that the largest shareholder is BlackRock, Inc. with 9.5% of shares outstanding. For context, the second largest shareholder holds about 9.3% of the shares outstanding, followed by an ownership of 4.1% by the third-largest shareholder. Barry Sternlicht, who is the third-largest shareholder, also happens to hold the title of Chairman of the Board.
On studying our ownership data, we found that 25 of the top shareholders collectively own less than 50% of the share register, implying that no single individual has a majority interest.
While it makes sense to study institutional ownership data for a company, it also makes sense to study analyst sentiments to know which way the wind is blowing. There are plenty of analysts covering the stock, so it might be worth seeing what they are forecasting, too.
Insider Ownership Of Starwood Property Trust
The definition of an insider can differ slightly between different countries, but members of the board of directors always count. 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.
We can report that insiders do own shares in Starwood Property Trust, Inc.. The insiders have a meaningful stake worth US$315m. Most would see this as a real positive. Most would say this shows alignment of interests between shareholders and the board. Still, it might be worth checking if those insiders have been selling.
General Public Ownership
With a 43% ownership, the general public, mostly comprising of individual investors, have some degree of sway over Starwood Property Trust. While this group can't necessarily call the shots, it can certainly have a real influence on how the company is run.
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 3 warning signs for Starwood Property Trust (2 make us uncomfortable) 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.
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