NexPoint Diversified Real Estate Trust (NYSE:NXDT) has caught the attention of institutional investors who hold a sizeable 45% stake
Key Insights
Given the large stake in the stock by institutions, NexPoint Diversified Real Estate Trust's stock price might be vulnerable to their trading decisions
A total of 24 investors have a majority stake in the company with 50% ownership
Every investor in NexPoint Diversified Real Estate Trust (NYSE:NXDT) should be aware of the most powerful shareholder groups. We can see that institutions own the lion's share in the company with 45% ownership. In other words, the group stands to gain the most (or lose the most) from their investment into the company.
Since institutional have access to huge amounts of capital, their market moves tend to receive a lot of scrutiny by retail or individual investors. Hence, having a considerable amount of institutional money invested in a company is often regarded as a desirable trait.
Let's delve deeper into each type of owner of NexPoint Diversified Real Estate Trust, beginning with the chart below.
View our latest analysis for NexPoint Diversified Real Estate Trust
What Does The Institutional Ownership Tell Us About NexPoint Diversified Real Estate Trust?
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.
NexPoint Diversified Real Estate Trust already has institutions on the share registry. Indeed, they own a respectable stake in the company. 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 NexPoint Diversified Real Estate Trust's earnings history below. Of course, the future is what really matters.
Hedge funds don't have many shares in NexPoint Diversified Real Estate Trust. The company's CEO James Dondero is the largest shareholder with 13% of shares outstanding. For context, the second largest shareholder holds about 8.4% of the shares outstanding, followed by an ownership of 5.9% by the third-largest shareholder.
After doing some more digging, we found that the top 24 have the combined ownership of 50% in the company, suggesting that no single shareholder has significant control over the company.
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. As far as we can tell there isn't analyst coverage of the company, so it is probably flying under the radar.
Insider Ownership Of NexPoint Diversified Real Estate Trust
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.
Insider ownership is positive when it signals leadership are thinking like the true owners of the company. However, high insider ownership can also give immense power to a small group within the company. This can be negative in some circumstances.
Our most recent data indicates that insiders own a reasonable proportion of NexPoint Diversified Real Estate Trust. It has a market capitalization of just US$392m, and insiders have US$53m worth of shares in their own names. We would say this shows alignment with shareholders, but it is worth noting that the company is still quite small; some insiders may have founded the business. You can click here to see if those insiders have been buying or selling.
General Public Ownership
The general public-- including retail investors -- own 42% 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.
Next Steps:
It's always worth thinking about the different groups who own shares in a company. But to understand NexPoint Diversified Real Estate Trust better, we need to consider many other factors. Take risks for example - NexPoint Diversified Real Estate Trust has 2 warning signs (and 1 which is a bit concerning) we think you should know about.
Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of interesting companies.
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.
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