After losing 13% in the past year, Direct Line Insurance Group plc (LON:DLG) institutional owners must be relieved by the recent gain
Key Insights
Given the large stake in the stock by institutions, Direct Line Insurance Group's stock price might be vulnerable to their trading decisions
The top 9 shareholders own 50% of the company
Ownership research along with analyst forecasts data help provide a good understanding of opportunities in a stock
Every investor in Direct Line Insurance Group plc (LON:DLG) should be aware of the most powerful shareholder groups. With 80% stake, institutions possess the maximum shares in the company. Put another way, the group faces the maximum upside potential (or downside risk).
Last week's UK£96m market cap gain would probably be appreciated by institutional investors, especially after a year of 13% losses.
Let's take a closer look to see what the different types of shareholders can tell us about Direct Line Insurance Group.
View our latest analysis for Direct Line Insurance Group
What Does The Institutional Ownership Tell Us About Direct Line Insurance Group?
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.
Direct Line Insurance Group 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. When multiple institutions own a stock, there's always a risk that they are in a 'crowded trade'. When such a trade goes wrong, multiple parties may compete to sell stock fast. This risk is higher in a company without a history of growth. You can see Direct Line Insurance Group's historic earnings and revenue below, but keep in mind there's always more to the story.
Institutional investors own over 50% of the company, so together than can probably strongly influence board decisions. Hedge funds don't have many shares in Direct Line Insurance Group. Looking at our data, we can see that the largest shareholder is FMR LLC with 7.1% of shares outstanding. Meanwhile, the second and third largest shareholders, hold 7.1% and 6.8%, 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. Quite a few analysts cover the stock, so you could look into forecast growth quite easily.
Insider Ownership Of Direct Line Insurance Group
While the precise definition of an insider can be subjective, almost everyone considers board members to be insiders. Management ultimately answers to the board. However, it is not uncommon for managers to be executive board members, especially if they are a founder or the CEO.
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 data suggests that insiders own under 1% of Direct Line Insurance Group plc in their own names. It's a big company, so even a small proportional interest can create alignment between the board and shareholders. In this case insiders own UK£9.3m worth of shares. Arguably, recent buying and selling is just as important to consider. You can click here to see if insiders have been buying or selling.
General Public Ownership
The general public-- including retail investors -- own 11% stake in the company, and hence can't easily be ignored. While this size of ownership may not be enough to sway a policy decision in their favour, they can still make a collective impact on company policies.
Private Equity Ownership
With a stake of 5.6%, private equity firms could influence the Direct Line Insurance Group board. Some might like this, because private equity are sometimes activists who hold management accountable. But other times, private equity is selling out, having taking the company public.
Next Steps:
It's always worth thinking about the different groups who own shares in a company. But to understand Direct Line Insurance Group better, we need to consider many other factors.
Many find it useful to take an in depth look at how a company has performed in the past. You can access this detailed graph of past earnings, revenue and cash flow.
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.
