WestRock Company's (NYSE:WRK) US$608m market value fall may be overlooked by institutional investors after a year of 0.1% returns
Key Insights
Significantly high institutional ownership implies WestRock's stock price is sensitive to their trading actions
The top 13 shareholders own 51% of the company
Using data from analyst forecasts alongside ownership research, one can better assess the future performance of a company
Every investor in WestRock Company (NYSE:WRK) should be aware of the most powerful shareholder groups. And the group that holds the biggest piece of the pie are institutions with 88% ownership. In other words, the group stands to gain the most (or lose the most) from their investment into the company.
No shareholder likes losing money on their investments, especially institutional investors who saw their holdings drop 6.1% in value last week. However, the 0.1% one-year return to shareholders may have helped lessen their pain. But they would probably be wary of future losses.
Let's take a closer look to see what the different types of shareholders can tell us about WestRock.
See our latest analysis for WestRock
What Does The Institutional Ownership Tell Us About WestRock?
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.
WestRock 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. 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 WestRock's historic earnings and revenue below, but keep in mind there's always more to the story.
Investors should note that institutions actually own more than half the company, so they can collectively wield significant power. Hedge funds don't have many shares in WestRock. The Vanguard Group, Inc. is currently the company's largest shareholder with 12% of shares outstanding. With 10% and 5.3% of the shares outstanding respectively, BlackRock, Inc. and Greenhaven Associates Inc are the second and third largest shareholders.
Looking at the shareholder registry, we can see that 51% of the ownership is controlled by the top 13 shareholders, meaning that no single shareholder has a majority interest in the ownership.
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 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 WestRock
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.
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 data suggests that insiders own under 1% of WestRock Company in their own names. As it is a large company, we'd only expect insiders to own a small percentage of it. But it's worth noting that they own US$55m worth of shares. It is good to see board members owning shares, but it might be worth checking if those insiders have been buying.
General Public Ownership
The general public, who are usually individual investors, hold a 11% stake in WestRock. This size of ownership, while considerable, may not be enough to change company policy if the decision is not in sync with other large shareholders.
Next Steps:
It's always worth thinking about the different groups who own shares in a company. But to understand WestRock better, we need to consider many other factors. Take risks for example - WestRock has 2 warning signs (and 1 which is a bit concerning) we think you should know about.
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.
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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.
