Institutional investors may overlook CRH plc's (LON:CRH) recent UK£1.5b market cap drop as long-term gains remain positive
Key Insights
Significantly high institutional ownership implies CRH's stock price is sensitive to their trading actions
A total of 25 investors have a majority stake in the company with 43% ownership
Using data from analyst forecasts alongside ownership research, one can better assess the future performance of a company
A look at the shareholders of CRH plc (LON:CRH) can tell us which group is most powerful. With 55% stake, institutions possess the maximum shares in the company. 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 UK£30b last week. Still, the 48% one-year gains may have helped mitigate their overall losses. But they would probably be wary of future losses.
Let's take a closer look to see what the different types of shareholders can tell us about CRH.
See our latest analysis for CRH
What Does The Institutional Ownership Tell Us About CRH?
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.
CRH 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 CRH, (below). Of course, keep in mind that there are other factors to consider, too.
Since institutional investors own more than half the issued stock, the board will likely have to pay attention to their preferences. We note that hedge funds don't have a meaningful investment in CRH. The company's largest shareholder is BlackRock, Inc., with ownership of 8.4%. In comparison, the second and third largest shareholders hold about 4.7% and 4.4% of the stock.
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 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. Quite a few analysts cover the stock, so you could look into forecast growth quite easily.
Insider Ownership Of CRH
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 CRH plc insiders own under 1% of the company. Being so large, we would not expect insiders to own a large proportion of the stock. Collectively, they own UK£9.6m of stock. 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
The general public, who are usually individual investors, hold a 45% stake in CRH. While this group can't necessarily call the shots, it can certainly have a real influence on how the company is run.
Next Steps:
It's always worth thinking about the different groups who own shares in a company. But to understand CRH better, we need to consider many other factors.
I like to dive deeper into how a company has performed in the past. You can find historic revenue and earnings in this detailed graph.
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
