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Do Institutions Own CAE Inc. (TSE:CAE) Shares?

Simply Wall St

A look at the shareholders of CAE Inc. (TSE:CAE) can tell us which group is most powerful. Insiders often own a large chunk of younger, smaller, companies while huge companies tend to have institutions as shareholders. Companies that used to be publicly owned tend to have lower insider ownership.

With a market capitalization of CA$5.6b, CAE is rather large. We'd expect to see institutional investors on the register. Companies of this size are usually well known to retail investors, too. Taking a look at our data on the ownership groups (below), it's seems that institutions are noticeable on the share registry. Let's take a closer look to see what the different types of shareholder can tell us about CAE.

Check out our latest analysis for CAE

TSX:CAE Ownership Breakdown July 7th 2020
TSX:CAE Ownership Breakdown July 7th 2020

What Does The Institutional Ownership Tell Us About CAE?

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.

We can see that CAE does have institutional investors; and they hold a good portion of the company's stock. 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 CAE's earnings history, below. Of course, the future is what really matters.

TSX:CAE Earnings and Revenue Growth July 7th 2020
TSX:CAE Earnings and Revenue Growth July 7th 2020

Investors should note that institutions actually own more than half the company, so they can collectively wield significant power. CAE is not owned by hedge funds. Jarislowsky, Fraser Limited is currently the largest shareholder, with 5.2% of shares outstanding. Meanwhile, the second and third largest shareholders, hold 3.2% and 3.1%, of the shares outstanding, respectively.

A deeper look at our ownership data shows that the top 25 shareholders collectively hold less than half of the register, suggesting a large group of small holders where no one share holder has a majority.

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 plenty of analysts covering the stock, so it might be worth seeing what they are forecasting, too.

Insider Ownership Of CAE

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.

Most consider insider ownership a positive because it can indicate the board is well aligned with other shareholders. However, on some occasions too much power is concentrated within this group.

Our most recent data indicates that insiders own less than 1% of CAE Inc.. It is a pretty big company, so it would be possible for board members to own a meaningful interest in the company, without owning much of a proportional interest. In this case, they own around CA$10m worth of shares (at current prices). 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 holds a 43% stake in CAE. 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 CAE better, we need to consider many other factors. For instance, we've identified 2 warning signs for CAE (1 makes us a bit uncomfortable) that you should be aware of.

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.

This article by Simply Wall St is general in nature. 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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com.