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Every investor in Downer EDI Limited (ASX:DOW) should be aware of the most powerful shareholder groups. Generally speaking, as a company grows, institutions will increase their ownership. Conversely, insiders often decrease their ownership over time. Companies that have been privatized tend to have low insider ownership.
Downer EDI isn't enormous, but it's not particularly small either. It has a market capitalization of AU$3.8b, which means it would generally expect to see some institutions on the share registry. In the chart below, we can see that institutions own shares in the company. Let's take a closer look to see what the different types of shareholders can tell us about Downer EDI.
What Does The Institutional Ownership Tell Us About Downer EDI?
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 Downer EDI does have institutional investors; and they hold a good portion of the company's stock. This implies the analysts working for those institutions have looked at the stock and they like it. But just like anyone else, they could be wrong. 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 Downer EDI's earnings history below. Of course, the future is what really matters.
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 Downer EDI. The company's largest shareholder is Fidelity International Ltd, with ownership of 7.4%. The Vanguard Group, Inc. is the second largest shareholder owning 6.1% of common stock, and Nikko Asset Management Co., Ltd. holds about 5.4% of the company stock.
A closer look at our ownership figures suggests that the top 12 shareholders have a combined ownership of 51% 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. Quite a few analysts cover the stock, so you could look into forecast growth quite easily.
Insider Ownership Of Downer EDI
The definition of company insiders can be subjective and does vary between jurisdictions. Our data reflects individual insiders, capturing board members at the very least. 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 most recent data indicates that insiders own less than 1% of Downer EDI Limited. Keep in mind that it's a big company, and the insiders own AU$17m worth of shares. The absolute value might be more important than the proportional share. It is good to see board members owning shares, but it might be worth checking if those insiders have been buying.
General Public Ownership
With a 41% ownership, the general public have some degree of sway over Downer EDI. While this group can't necessarily call the shots, it can certainly have a real influence on how the company is run.
It's always worth thinking about the different groups who own shares in a company. But to understand Downer EDI better, we need to consider many other factors. For example, we've discovered 3 warning signs for Downer EDI (1 is a bit unpleasant!) that you should be aware of before investing here.
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.
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