- Significantly high institutional ownership implies Fortescue Metals Group’s stock prices are sensitive to their trading actions.
- The top 3 shareholders own 53% of the company
- Insiders have been buying lately
To get a sense of who is truly in control of Fortescue Metals Group Limited (ASX:FMG), it is important to understand the ownership structure of the business. And the group that holds the biggest piece of the pie are institutions with 56% ownership. Put another way, the group faces the maximum upside potential (or downside risk).
Last week’s 4.6% gain means that institutional investors were on the positive end of the spectrum even as the company has shown strong longer-term trends. The gains from last week would have further boosted the one-year return to shareholders which currently stand at 20%.
Let’s delve deeper into each type of owner of Fortescue Metals Group, beginning with the chart below.
Check out our latest analysis for Fortescue Metals Group
What Does The Institutional Ownership Tell Us About Fortescue Metals 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.
We can see that Fortescue Metals Group does have institutional investors; and they hold a good portion of the company’s 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. 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 Fortescue Metals Group’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. We note that hedge funds don’t have a meaningful investment in Fortescue Metals Group. Tattarang Pty Ltd is currently the company’s largest shareholder with 36% of shares outstanding. In comparison, the second and third largest shareholders hold about 8.8% and 7.7% of the stock.
To make our study more interesting, we found that the top 3 shareholders have a majority ownership in the company, meaning that they are powerful enough to influence the decisions of the company.
While it makes sense to study institutional ownership data for a company, it also makes sense to study analyst sentiments to know which way the wind is blowing. There are plenty of analysts covering the stock, so it might be worth seeing what they are forecasting, too.
Insider Ownership Of Fortescue Metals 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.
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 data suggests that insiders own under 1% of Fortescue Metals Group Limited in their own names. We do note, however, it is possible insiders have an indirect interest through a private company or other corporate structure. Being so large, we would not expect insiders to own a large proportion of the stock. Collectively, they own AU$264m of stock. In this sort of situation, it can be more interesting to see if those insiders have been buying or selling.
General Public Ownership
With a 32% ownership, the general public, mostly comprising of individual investors, have some degree of sway over Fortescue Metals Group. While this group can’t necessarily call the shots, it can certainly have a real influence on how the company is run.
Private Company Ownership
It seems that Private Companies own 12%, of the Fortescue Metals Group stock. Private companies may be related parties. Sometimes insiders have an interest in a public company through a holding in a private company, rather than in their own capacity as an individual. While it’s hard to draw any broad stroke conclusions, it is worth noting as an area for further research.
While it is well worth considering the different groups that own a company, there are other factors that are even more important. Case in point: We’ve spotted 2 warning signs for Fortescue Metals Group you should be aware of, and 1 of them is potentially serious.
If you would prefer discover what analysts are predicting in terms of future growth, do not miss this free report on analyst forecasts.
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.
Valuation is complex, but we’re helping make it simple.
Find out whether Fortescue Metals Group is potentially over or undervalued by checking out our comprehensive analysis, which includes fair value estimates, risks and warnings, dividends, insider transactions and financial health.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.
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.
Leave a Comment