Yahoo Finance Could Taylor Wimpey plc’s (LON:TW.) Investor Composition Impacts Your Returns?
Today, I will be analyzing Taylor Wimpey plc’s (LON:TW.) recent ownership structure, an important but not-so-popular subject among individual investors. A company’s ownership structure is often linked to its share performance in both the long- and short-term. The same amount of capital coming from an activist institution and a passive mutual fund has different implications on corporate governance, which is a decisive factor for a long-term investor. It also impacts the trading environment of company shares, which is more of a concern for short-term investors. Now I will analyze TW.’s shareholder registry in more detail.
Check out our latest analysis for Taylor Wimpey
Institutional Ownership
Institutions account for 85.8% of TW.’s outstanding shares, a significant enough holding to move stock prices if they start buying and selling in large quantities, especially when there are relatively small amounts of shares available on the market to trade. Although TW. has a high institutional ownership, such stock moves, in the short-term, are more commonly linked to a particular type of active institutional investors – hedge funds. In the case of TW., investors need not worry about such volatility considering active hedge funds don’t have a significant stake. However, we should dig deeper into TW.’s ownership structure and find out how other key ownership classes can affect its investment profile.
Insider Ownership
I find insiders are an important group of stakeholders, who are directly involved in making key decisions related to the use of capital. In essence, insider ownership is more about the alignment of shareholders’ interests with the management. A stake of less than 1% in TW. is relatively small, though at least there is still some alignment of interest with shareholders. A higher level of insider ownership has been found to reflect the choosing of projects with higher return on investments compared to lower returning projects for the sake of expansion. In addition to this, it may be interesting to look at insider buying and selling activities. Keep in mind that buying may be sign of upbeat future expectations, but selling doesn’t necessarily mean the opposite as the insiders might just be doing it out of their personal financial needs.
General Public Ownership
A big stake of 13.1% in TW. is held by the general public. This level of ownership gives retail investors the power to sway key policy decisions such as board composition, executive compensation, and potential acquisitions. This is a positive sign for an investor who wants to be involved in key decision-making of the company.
Private Company Ownership
Another group of owners that a potential investor in TW. should consider are private companies, with a stake of 0.1%. While they invest more often due to strategic interests, an investment can also be driven by capital gains through share price appreciation. However, an ownership of this size may be relatively insignificant, meaning that these shareholders may not have the potential to influence TW.’s business strategy. Thus, investors not need worry too much about the consequences of these holdings.
Next Steps:
TW.’s considerably high level of institutional ownership calls for further analysis into its margin of safety. This will enable shareholders to comfortably invest in the company while avoid getting trapped in a sustained sell-off that is often observed in stocks with this level of institutional participation. However, ownership structure should not be the only focus of your research when constructing an investment thesis around TW.. Rather, you should be looking at fundamental drivers such as the intrinsic valuation, which is a key driver of Taylor Wimpey’s share price. I urge you to complete your research by taking a look at the following:
Future Outlook: What are well-informed industry analysts predicting for TW.’s future growth? Take a look at our free research report of analyst consensus for TW.’s outlook.
Past Track Record: Has TW. been consistently performing well irrespective of the ups and downs in the market? Go into more detail in the past performance analysis and take a look at the free visual representations of TW.’s historicals for more clarity.
Other High-Performing Stocks: Are there other stocks that provide better prospects with proven track records? Explore our free list of these great stocks here.
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.
To help readers see past the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price-sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned. For errors that warrant correction please contact the editor at editorial-team@simplywallst.com.
