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After a year of 3.5% returns, FirstService Corporation's (TSE:FSV) share price drop last week may have less of an impact on institutional investors

Key Insights

  • Significantly high institutional ownership implies FirstService's stock price is sensitive to their trading actions

  • 51% of the business is held by the top 10 shareholders

  • Recent sales by insiders

To get a sense of who is truly in control of FirstService Corporation (TSE:FSV), it is important to understand the ownership structure of the business. The group holding the most number of shares in the company, around 70% to be precise, is institutions. That is, the group stands to benefit the most if the stock rises (or lose the most if there is a downturn).

Institutional investors endured the highest losses after the company's market cap fell by CA$194m last week. However, the 3.5% one-year return to shareholders might have softened the blow. But they would probably be wary of future losses.

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Let's delve deeper into each type of owner of FirstService, beginning with the chart below.

View our latest analysis for FirstService

ownership-breakdown
ownership-breakdown

What Does The Institutional Ownership Tell Us About FirstService?

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.

As you can see, institutional investors have a fair amount of stake in FirstService. 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. 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 FirstService, (below). Of course, keep in mind that there are other factors to consider, too.

earnings-and-revenue-growth
earnings-and-revenue-growth

Since institutional investors own more than half the issued stock, the board will likely have to pay attention to their preferences. It would appear that 9.0% of FirstService shares are controlled by hedge funds. That worth noting, since hedge funds are often quite active investors, who may try to influence management. Many want to see value creation (and a higher share price) in the short term or medium term. The company's largest shareholder is Durable Capital Partners, LP, with ownership of 9.0%. With 8.8% and 6.8% of the shares outstanding respectively, Manulife Asset Management and Jay Hennick are the second and third largest shareholders. Jay Hennick, who is the third-largest shareholder, also happens to hold the title of Chairman of the Board.

On further inspection, we found that more than half the company's shares are owned by the top 10 shareholders, suggesting that the interests of the larger shareholders are balanced out to an extent by the smaller ones.

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 FirstService

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.

Our most recent data indicates that insiders own some shares in FirstService Corporation. This is a big company, so it is good to see this level of alignment. Insiders own CA$698m worth of shares (at current prices). If you would like to explore the question of insider alignment, you can click here to see if insiders have been buying or selling.

General Public Ownership

The general public, who are usually individual investors, hold a 10% stake in FirstService. 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 FirstService better, we need to consider many other factors. Take risks for example - FirstService has 2 warning signs (and 1 which doesn't sit too well with us) 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.

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.

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