U.S. Markets closed

Shareholders Should Check If Insiders Own Shares In HomeServe plc (LON:HSV)

Luis Baughman

The big shareholder groups in HomeServe plc (LON:HSV) have power over the company. Large companies usually have institutions as shareholders, and we usually see insiders owning shares in smaller companies. I quite like to see at least a little bit of insider ownership. As Charlie Munger said ‘Show me the incentive and I will show you the outcome.’

HomeServe is a pretty big company. It has a market capitalization of UK£3.45b. Normally institutions would own a significant portion of a company this size. In the chart below 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 HSV.

View our latest analysis for HomeServe

LSE:HSV Ownership Summary September 23rd 18

What Does The Institutional Ownership Tell Us About HomeServe?

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 HomeServe does have institutional investors; and they hold 74.6% of the stock. 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. It is not uncommon to see a big share price drop if two large institutional investors try to sell out of a stock at the same time. So it is worth checking the past earnings trajectory of HomeServe, (below). Of course, keep in mind that there are other factors to consider, too.

LSE:HSV Income Statement Export September 23rd 18

Institutional investors own over 50% of the company, so together than can probably strongly influence board decisions. HomeServe is not owned by hedge funds. Quite a few analysts cover the stock, so you could look into forecast growth quite easily.

Insider Ownership Of HomeServe

While the precise definition of an insider can be subjective, almost everyone considers board members to be insiders. 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 a reasonable proportion of HomeServe plc. Insiders own UK£437.8m worth of shares in the UK£3.45b company. That’s quite meaningful. Most would be pleased to see the board is investing alongside them. You may wish to access this free chart showing recent trading by insiders.

General Public Ownership

The general public holds a 11.4% stake in HSV. While this group can’t necessarily call the shots, it can certainly have a real influence on how the company is run.

Next Steps:

While it is well worth considering the different groups that own a company, there are other factors that are even more important.

I like to dive deeper into how a company has performed in the past. You can access this interactive graph of past earnings, revenue and cash flow, for free .

But ultimately it is the future, not the past, that will determine how well the owners of this business will do. Therefore we think it advisable to take a look at this free report showing whether analysts are predicting a brighter future.

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.

To help readers see past the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price-sensitive company announcements.

The author is an independent contributor and at the time of publication had no position in the stocks mentioned. For errors that warrant correction please contact the editor at editorial-team@simplywallst.com.