The big shareholder groups in Richelieu Hardware Ltd. (TSE:RCH) have power over the company. Large companies usually have institutions as shareholders, and we usually see insiders owning shares in smaller companies. Warren Buffett said that he likes "a business with enduring competitive advantages that is run by able and owner-oriented people." So it's nice to see some insider ownership, because it may suggest that management is owner-oriented.
Richelieu Hardware isn't enormous, but it's not particularly small either. It has a market capitalization of CA$2.0b, which means it would generally expect to see some institutions on the share registry. Taking a look at our data on the ownership groups (below), it seems that institutional investors have bought into the company. Let's take a closer look to see what the different types of shareholders can tell us about Richelieu Hardware.
What Does The Institutional Ownership Tell Us About Richelieu Hardware?
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.
As you can see, institutional investors have a fair amount of stake in Richelieu Hardware. 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. 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 Richelieu Hardware, (below). Of course, keep in mind that there are other factors to consider, too.
Hedge funds don't have many shares in Richelieu Hardware. The company's largest shareholder is Mawer Investment Management Limited, with ownership of 16%. Meanwhile, the second and third largest shareholders, hold 7.5% and 5.7%, of the shares outstanding, respectively. Richard Lord, who is the second-largest shareholder, also happens to hold the title of Chief Executive Officer.
A closer look at our ownership figures suggests that the top 18 shareholders have a combined ownership of 50% implying that no single shareholder has a majority.
While it makes sense to study institutional ownership data for a company, it also makes sense to study analyst sentiments to know which way the wind is blowing. 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 Richelieu Hardware
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.
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.
We can see that insiders own shares in Richelieu Hardware Ltd.. This is a big company, so it is good to see this level of alignment. Insiders own CA$163m worth of shares (at current prices). If you would like to explore the question of insider alignment, you can click here to see if insiders have been buying or selling.
General Public Ownership
The general public, with a 42% stake in the company, will not easily be ignored. 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.
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. Case in point: We've spotted 1 warning sign for Richelieu Hardware you should be aware of.
If you would prefer discover what analysts are predicting in terms of future growth, do not miss this free report on analyst forecasts.
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.
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