Institutional investors are Universal Insurance Holdings, Inc.'s (NYSE:UVE) biggest bettors and were rewarded after last week's US$82m market cap gain
Key Insights
Significantly high institutional ownership implies Universal Insurance Holdings' stock price is sensitive to their trading actions
A total of 19 investors have a majority stake in the company with 51% ownership
If you want to know who really controls Universal Insurance Holdings, Inc. (NYSE:UVE), then you'll have to look at the makeup of its share registry. With 68% stake, institutions possess the maximum shares in the company. Put another way, the group faces the maximum upside potential (or downside risk).
Last week’s 17% gain means that institutional investors were on the positive end of the spectrum even as the company has shown strong longer-term trends. One-year return to shareholders is currently 10% and last week’s gain was the icing on the cake.
In the chart below, we zoom in on the different ownership groups of Universal Insurance Holdings.
See our latest analysis for Universal Insurance Holdings
What Does The Institutional Ownership Tell Us About Universal Insurance Holdings?
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.
Universal Insurance Holdings 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 Universal Insurance Holdings, (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. Hedge funds don't have many shares in Universal Insurance Holdings. BlackRock, Inc. is currently the largest shareholder, with 7.2% of shares outstanding. Meanwhile, the second and third largest shareholders, hold 5.9% and 5.5%, of the shares outstanding, respectively. In addition, we found that Stephen Donaghy, the CEO has 2.2% of the shares allocated to their name.
After doing some more digging, we found that the top 19 have the combined ownership of 51% in the company, suggesting that no single shareholder has significant control over the company.
Researching institutional ownership is a good way to gauge and filter a stock's expected performance. The same can be achieved by studying analyst sentiments. While there is some analyst coverage, the company is probably not widely covered. So it could gain more attention, down the track.
Insider Ownership Of Universal Insurance Holdings
While the precise definition of an insider can be subjective, almost everyone considers board members to be insiders. Management ultimately answers to the board. However, it is not uncommon for managers to be executive board members, especially if they are a founder or the CEO.
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 information suggests that insiders maintain a significant holding in Universal Insurance Holdings, Inc.. Insiders have a US$61m stake in this US$590m business. We would say this shows alignment with shareholders, but it is worth noting that the company is still quite small; some insiders may have founded the business. You can click here to see if those insiders have been buying or selling.
General Public Ownership
The general public-- including retail investors -- own 22% stake in the company, and hence can't easily be ignored. 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 example, we've discovered 2 warning signs for Universal Insurance Holdings that you should be aware of before investing here.
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.
