Institutional investors in Westgold Resources Limited (ASX:WGX) lost 10% last week but have reaped the benefits of longer-term growth
Key Insights
Given the large stake in the stock by institutions, Westgold Resources' stock price might be vulnerable to their trading decisions
The top 9 shareholders own 51% of the company
Past performance of a company along with ownership data serve to give a strong idea about prospects for a business
To get a sense of who is truly in control of Westgold Resources Limited (ASX:WGX), 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 70% ownership. That is, the group stands to benefit the most if the stock rises (or lose the most if there is a downturn).
No shareholder likes losing money on their investments, especially institutional investors who saw their holdings drop 10% in value last week. However, the 77% one-year return to shareholders might have softened the blow. But they would probably be wary of future losses.
In the chart below, we zoom in on the different ownership groups of Westgold Resources.
Check out our latest analysis for Westgold Resources
What Does The Institutional Ownership Tell Us About Westgold Resources?
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.
Westgold Resources 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. If multiple institutions change their view on a stock at the same time, you could see the share price drop fast. It's therefore worth looking at Westgold Resources' earnings history below. Of course, the future is what really matters.
Institutional investors own over 50% of the company, so together than can probably strongly influence board decisions. Westgold Resources is not owned by hedge funds. Looking at our data, we can see that the largest shareholder is L1 Capital Pty. Limited with 11% of shares outstanding. Meanwhile, the second and third largest shareholders, hold 7.0% and 5.0%, of the shares outstanding, respectively.
On further inspection, we found that more than half the company's shares are owned by the top 9 shareholders, suggesting that the interests of the larger shareholders are balanced out to an extent by the smaller ones.
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. There is a little analyst coverage of the stock, but not much. So there is room for it to gain more coverage.
Insider Ownership Of Westgold Resources
While the precise definition of an insider can be subjective, almost everyone considers board members to be insiders. 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.
Shareholders would probably be interested to learn that insiders own shares in Westgold Resources Limited. It has a market capitalization of just AU$815m, and insiders have AU$39m worth of shares, in their own names. It is good to see some investment by insiders, but it might be worth checking if those insiders have been buying.
General Public Ownership
With a 24% ownership, the general public, mostly comprising of individual investors, have some degree of sway over Westgold Resources. 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:
I find it very interesting to look at who exactly owns a company. But to truly gain insight, we need to consider other information, too. Consider for instance, the ever-present spectre of investment risk. We've identified 1 warning sign with Westgold Resources , and understanding them should be part of your investment process.
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.
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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.
