Stock Analysis

In the wake of Traeger, Inc.'s (NYSE:COOK) latest US$36m market cap drop, institutional owners may be forced to take severe actions

NYSE:COOK
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Key Insights

  • Significantly high institutional ownership implies Traeger's stock price is sensitive to their trading actions
  • 51% of the business is held by the top 3 shareholders
  • Recent purchases by insiders

To get a sense of who is truly in control of Traeger, Inc. (NYSE:COOK), it is important to understand the ownership structure of the business. The group holding the most number of shares in the company, around 37% to be precise, is institutions. In other words, the group stands to gain the most (or lose the most) from their investment into the company.

As a result, institutional investors endured the highest losses last week after market cap fell by US$36m. The recent loss, which adds to a one-year loss of 44% for stockholders, may not sit well with this group of investors. Institutions or "liquidity providers" control large sums of money and therefore, these types of investors usually have a lot of influence over stock price movements. As a result, if the decline continues, institutional investors may be pressured to sell Traeger which might hurt individual investors.

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

See our latest analysis for Traeger

ownership-breakdown
NYSE:COOK Ownership Breakdown April 16th 2024

What Does The Institutional Ownership Tell Us About Traeger?

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.

We can see that Traeger does have institutional investors; and they hold a good portion of the company's stock. This can indicate that the company has a certain degree of credibility in the investment community. However, it is best to be wary of relying on the supposed validation that comes with institutional investors. They too, get it wrong sometimes. 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 Traeger's historic earnings and revenue below, but keep in mind there's always more to the story.

earnings-and-revenue-growth
NYSE:COOK Earnings and Revenue Growth April 16th 2024

Traeger is not owned by hedge funds. AEA Investors LP is currently the largest shareholder, with 26% of shares outstanding. For context, the second largest shareholder holds about 19% of the shares outstanding, followed by an ownership of 5.1% by the third-largest shareholder. Furthermore, CEO Jeremy Andrus is the owner of 4.4% of the company's shares.

After doing some more digging, we found that the top 3 shareholders collectively control more than half of the company's shares, implying that they have considerable power to influence the company's decisions.

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 Traeger

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.

I generally consider insider ownership to be a good thing. However, on some occasions it makes it more difficult for other shareholders to hold the board accountable for decisions.

We can see that insiders own shares in Traeger, Inc.. As individuals, the insiders collectively own US$15m worth of the US$276m company. It is good to see some investment by insiders, but it might be worth checking if those insiders have been buying.

General Public Ownership

With a 24% ownership, the general public, mostly comprising of individual investors, have some degree of sway over Traeger. 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.

Private Equity Ownership

With an ownership of 26%, private equity firms are in a position to play a role in shaping corporate strategy with a focus on value creation. Sometimes we see private equity stick around for the long term, but generally speaking they have a shorter investment horizon and -- as the name suggests -- don't invest in public companies much. After some time they may look to sell and redeploy capital elsewhere.

Private Company Ownership

It seems that Private Companies own 6.9%, of the Traeger 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.

Next Steps:

While it is well worth considering the different groups that own a company, there are other factors that are even more important. For instance, we've identified 2 warning signs for Traeger that you should be aware of.

If you are like me, you may want to think about whether this company will grow or shrink. Luckily, you can check this free report showing analyst forecasts for its 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.

Valuation is complex, but we're helping make it simple.

Find out whether Traeger 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.

View the Free Analysis

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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.