After losing 1.8% in the past year, Smith & Nephew plc (LON:SN.) institutional owners must be relieved by the recent gain
Key Insights
Significantly high institutional ownership implies Smith & Nephew's stock price is sensitive to their trading actions
A total of 25 investors have a majority stake in the company with 49% ownership
If you want to know who really controls Smith & Nephew plc (LON:SN.), then you'll have to look at the makeup of its share registry. We can see that institutions own the lion's share in the company with 81% ownership. Put another way, the group faces the maximum upside potential (or downside risk).
After a year of 1.8% losses, last week’s 3.2% gain would be welcomed by institutional investors as a likely sign that returns might start trending higher.
Let's take a closer look to see what the different types of shareholders can tell us about Smith & Nephew.
Check out our latest analysis for Smith & Nephew
What Does The Institutional Ownership Tell Us About Smith & Nephew?
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 Smith & Nephew. 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 Smith & Nephew's earnings history below. Of course, the future is what really matters.
Investors should note that institutions actually own more than half the company, so they can collectively wield significant power. Hedge funds don't have many shares in Smith & Nephew. Looking at our data, we can see that the largest shareholder is BlackRock, Inc. with 9.1% of shares outstanding. In comparison, the second and third largest shareholders hold about 4.4% and 2.7% of the stock.
Our studies suggest that the top 25 shareholders collectively control less than half of the company's shares, meaning that the company's shares are widely disseminated and there is no dominant shareholder.
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 a reasonable number of analysts covering the stock, so it might be useful to find out their aggregate view on the future.
Insider Ownership Of Smith & Nephew
The definition of an insider can differ slightly between different countries, but members of the board of directors always count. 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.
Our data suggests that insiders own under 1% of Smith & Nephew plc in their own names. Being so large, we would not expect insiders to own a large proportion of the stock. Collectively, they own UK£9.3m of stock. 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-- including retail investors -- own 18% 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:
It's always worth thinking about the different groups who own shares in a company. But to understand Smith & Nephew better, we need to consider many other factors. For instance, we've identified 4 warning signs for Smith & Nephew (2 can't be ignored) that 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.
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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.
