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Is Netwealth Group Limited (ASX:NWL) Popular Amongst Insiders?

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·4 min read
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Every investor in Netwealth Group Limited (ASX:NWL) 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. 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.

Netwealth Group 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 institutional investors have bought into the company. We can zoom in on the different ownership groups, to learn more about Netwealth Group.

View our latest analysis for Netwealth Group

ownership-breakdown
ownership-breakdown

What Does The Institutional Ownership Tell Us About Netwealth Group?

Institutional investors commonly compare their own returns to the returns of a commonly followed index. So they generally do consider buying larger companies that are included in the relevant benchmark index.

Netwealth Group already has institutions on the share registry. Indeed, they own a respectable stake in the company. This can indicate that the company has a certain degree of credibility in the investment community. However, it is best to be wary of relying on the supposed validation that comes with institutional investors. They too, get it wrong sometimes. 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 Netwealth Group's earnings history below. Of course, the future is what really matters.

earnings-and-revenue-growth
earnings-and-revenue-growth

Hedge funds don't have many shares in Netwealth Group. With a 56% stake, CEO Michael Heine is the largest shareholder. This implies that they possess majority interests and have significant control over the company. Investors usually consider it a good sign when the company leadership has such a significant stake, as this is widely perceived to increase the chance that the management will act in the best interests of the company. With 6.3% and 4.9% of the shares outstanding respectively, Netwealth Investments Ltd. and Hyperion Asset Management Limited are the second and third largest shareholders.

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

Insider Ownership Of Netwealth Group

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. 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 most recent data indicates that insiders own the majority of Netwealth Group Limited. This means they can collectively make decisions for the company. Given it has a market cap of AU$3.8b, that means insiders have a whopping AU$2.2b worth of shares in their own names. It is good to see this level of investment. You can check here to see if those insiders have been selling any of their shares.

General Public Ownership

The general public, with a 18% stake in the company, will not 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:

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. To that end, you should be aware of the 1 warning sign we've spotted with Netwealth Group .

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 (at) simplywallst.com.