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Every investor in Builders FirstSource, Inc. (NASDAQ:BLDR) should be aware of the most powerful shareholder groups. Insiders often own a large chunk of younger, smaller, companies while huge companies tend to have institutions as shareholders. We also tend to see lower insider ownership in companies that were previously publicly owned.
With a market capitalization of US$9.6b, Builders FirstSource is rather large. We'd expect to see institutional investors on the register. Companies of this size are usually well known to retail investors, too. In the chart below, we can see that institutions are noticeable on the share registry. Let's take a closer look to see what the different types of shareholders can tell us about Builders FirstSource.
What Does The Institutional Ownership Tell Us About Builders FirstSource?
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.
As you can see, institutional investors have a fair amount of stake in Builders FirstSource. 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 Builders FirstSource'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. Builders FirstSource is not owned by hedge funds. BlackRock, Inc. is currently the largest shareholder, with 8.7% of shares outstanding. For context, the second largest shareholder holds about 6.0% of the shares outstanding, followed by an ownership of 4.7% by the third-largest shareholder.
A deeper look at our ownership data shows that the top 25 shareholders collectively hold less than half of the register, suggesting a large group of small holders where no single shareholder has a majority.
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 Builders FirstSource
The definition of an insider can differ slightly between different countries, but members of the board of directors always count. 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.
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.
I can report that insiders do own shares in Builders FirstSource, Inc.. The insiders have a meaningful stake worth US$127m. Most would say this shows a good alignment of interests between shareholders and the board. Still, it might be worth checking if those insiders have been selling.
General Public Ownership
The general public, with a 32% stake in the company, will not 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.
While it is well worth considering the different groups that own a company, there are other factors that are even more important. Take risks for example - Builders FirstSource has 3 warning signs (and 2 which can't be ignored) we think you should know about.
If you are like me, you may want to think about whether this company will grow or shrink. Luckily, you can check this free report showing analyst forecasts for its 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.
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.
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