Institutional investors may adopt severe steps after Northam Platinum Holdings Limited's (JSE:NPH) latest 9.2% drop adds to a year losses
Key Insights
Given the large stake in the stock by institutions, Northam Platinum Holdings' stock price might be vulnerable to their trading decisions
54% of the business is held by the top 6 shareholders
Using data from analyst forecasts alongside ownership research, one can better assess the future performance of a company
Every investor in Northam Platinum Holdings Limited (JSE:NPH) should be aware of the most powerful shareholder groups. And the group that holds the biggest piece of the pie are institutions with 44% 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 9.2% last week. Needless to say, the recent loss which further adds to the one-year loss to shareholders of 10% might not go down well especially with this category of shareholders. Also referred to as "smart money", institutions have a lot of sway over how a stock's price moves. Hence, if weakness in Northam Platinum Holdings' share price continues, institutional investors may feel compelled to sell the stock, which might not be ideal for individual investors.
Let's take a closer look to see what the different types of shareholders can tell us about Northam Platinum Holdings.
Check out our latest analysis for Northam Platinum Holdings
What Does The Institutional Ownership Tell Us About Northam Platinum Holdings?
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 Northam Platinum Holdings does have institutional investors; and they hold a good portion of the company's stock. This implies the analysts working for those institutions have looked at the stock and they like it. But just like anyone else, they could be wrong. 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 Northam Platinum Holdings' historic earnings and revenue below, but keep in mind there's always more to the story.
Our data indicates that hedge funds own 11% of Northam Platinum Holdings. That worth noting, since hedge funds are often quite active investors, who may try to influence management. Many want to see value creation (and a higher share price) in the short term or medium term. Public Investment Corporation Limited is currently the largest shareholder, with 17% of shares outstanding. M&G Investment Management Limited is the second largest shareholder owning 11% of common stock, and Royal Bafokeng Holdings (Pty) Limited holds about 8.8% of the company stock.
We did some more digging and found that 6 of the top shareholders account for roughly 54% 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. 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 Northam Platinum Holdings
The definition of company insiders can be subjective and does vary between jurisdictions. Our data reflects individual insiders, capturing board members at the very least. 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 data suggests that insiders own under 1% of Northam Platinum Holdings Limited in their own names. It's a big company, so even a small proportional interest can create alignment between the board and shareholders. In this case insiders own R17m worth of shares. It is always good to see at least some insider ownership, but it might be worth checking if those insiders have been selling.
General Public Ownership
With a 19% ownership, the general public, mostly comprising of individual investors, have some degree of sway over Northam Platinum Holdings. 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 Northam Platinum Holdings .
Ultimately the future is most important. You can access this free report on analyst forecasts for the company.
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
