Yahoo Finance ARB Corporation Limited (ASX:ARB) has caught the attention of institutional investors who hold a sizeable 48% stake
Key Insights
Institutions' substantial holdings in ARB implies that they have significant influence over the company's share price
50% of the business is held by the top 13 shareholders
Analyst forecasts along with ownership data serve to give a strong idea about prospects for a business
To get a sense of who is truly in control of ARB Corporation Limited (ASX:ARB), 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 48% ownership. That is, the group stands to benefit the most if the stock rises (or lose the most if there is a downturn).
Since institutional have access to huge amounts of capital, their market moves tend to receive a lot of scrutiny by retail or individual investors. Hence, having a considerable amount of institutional money invested in a company is often regarded as a desirable trait.
Let's take a closer look to see what the different types of shareholders can tell us about ARB.
Check out our latest analysis for ARB
What Does The Institutional Ownership Tell Us About ARB?
Institutions typically measure themselves against a benchmark when reporting to their own investors, so they often become more enthusiastic about a stock once it's included in a major index. We would expect most companies to have some institutions on the register, especially if they are growing.
ARB 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. 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 ARB's historic earnings and revenue below, but keep in mind there's always more to the story.
Hedge funds don't have many shares in ARB. The company's largest shareholder is Bennelong Funds Management Group Pty Ltd, with ownership of 13%. Meanwhile, the second and third largest shareholders, hold 5.9% and 5.8%, of the shares outstanding, respectively.
Looking at the shareholder registry, we can see that 50% of the ownership is controlled by the top 13 shareholders, meaning that no single shareholder has a majority interest in the ownership.
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 plenty of analysts covering the stock, so it might be worth seeing what they are forecasting, too.
Insider Ownership Of ARB
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.
Most consider insider ownership a positive because it can indicate the board is well aligned with other shareholders. However, on some occasions too much power is concentrated within this group.
Our most recent data indicates that insiders own some shares in ARB Corporation Limited. It is a pretty big company, so it is generally a positive to see some potentially meaningful alignment. In this case, they own around AU$246m worth of shares (at current prices). Most would say this shows alignment of interests between shareholders and the board. Still, it might be worth checking if those insiders have been selling.
General Public Ownership
With a 41% ownership, the general public, mostly comprising of individual investors, have some degree of sway over ARB. While this group can't necessarily call the shots, it can certainly have a real influence on how the company is run.
Next Steps:
It's always worth thinking about the different groups who own shares in a company. But to understand ARB better, we need to consider many other factors.
I like to dive deeper into how a company has performed in the past. You can find historic revenue and earnings in this detailed graph.
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.
