Yahoo Finance With 60% ownership in Ero Copper Corp. (TSE:ERO), institutional investors have a lot riding on the business
Key Insights
Given the large stake in the stock by institutions, Ero Copper's stock price might be vulnerable to their trading decisions
50% of the business is held by the top 10 shareholders
Every investor in Ero Copper Corp. (TSE:ERO) should be aware of the most powerful shareholder groups. And the group that holds the biggest piece of the pie are institutions with 60% ownership. In other words, the group stands to gain the most (or lose the most) from their investment into the company.
And things are looking up for institutional investors after the company gained CA$112m in market cap last week. One-year return to shareholders is currently 28% and last week’s gain was the icing on the cake.
In the chart below, we zoom in on the different ownership groups of Ero Copper.
View our latest analysis for Ero Copper
What Does The Institutional Ownership Tell Us About Ero Copper?
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.
Ero Copper already has institutions on the share registry. Indeed, they own a respectable stake in the company. 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 Ero Copper, (below). Of course, keep in mind that there are other factors to consider, too.
Investors should note that institutions actually own more than half the company, so they can collectively wield significant power. It would appear that 6.6% of Ero Copper shares are controlled by hedge funds. That's interesting, because hedge funds can be quite active and activist. Many look for medium term catalysts that will drive the share price higher. Looking at our data, we can see that the largest shareholder is FMR LLC with 7.8% of shares outstanding. The second and third largest shareholders are Fidelity International Ltd and GMT Capital Corp., with an equal amount of shares to their name at 6.6%. In addition, we found that David Strang, the CEO has 6.1% of the shares allocated to their name.
We also observed that the top 10 shareholders account for more than half of the share register, with a few smaller shareholders to balance the interests of the larger ones to a certain extent.
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 Ero Copper
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 information suggests that insiders maintain a significant holding in Ero Copper Corp.. It is very interesting to see that insiders have a meaningful CA$295m stake in this CA$2.1b business. Most would say this shows a good degree of alignment with shareholders, especially in a company of this size. You can click here to see if those insiders have been buying or selling.
General Public Ownership
The general public, who are usually individual investors, hold a 19% stake in Ero Copper. 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 Ero Copper better, we need to consider many other factors. Take risks for example - Ero Copper has 3 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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