Following a 14% decline over last year, recent gains may please ARB Corporation Limited (ASX:ARB) institutional owners

Key Insights

• Given the large stake in the stock by institutions, ARB's stock price might be vulnerable to their trading decisions
• The top 11 shareholders own 50% of the company
• Recent purchases by insiders

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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. We can see that institutions own the lion's share in the company with 50% ownership. That is, the group stands to benefit the most if the stock rises (or lose the most if there is a downturn).

After a year of 14% losses, last week’s 6.7% gain would be welcomed by institutional investors as a possible sign that returns might start trending higher.

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

View 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.

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

Hedge funds don't have many shares in ARB. The company's largest shareholder is Bennelong Funds Management Group Pty Ltd, with ownership of 11%. With 6.1% and 5.9% of the shares outstanding respectively, State Street Global Advisors, Inc. and Roger Brown are the second and third largest shareholders. Roger Brown, who is the third-largest shareholder, also happens to hold the title of Member of the Board of Directors.

A closer look at our ownership figures suggests that the top 11 shareholders have a combined ownership of 50% implying that no single shareholder has a majority.

While it makes sense to study institutional ownership data for a company, it also makes sense to study analyst sentiments to know which way the wind is blowing. Quite a few analysts cover the stock, so you could look into forecast growth quite easily.

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. The company management answer to the board and the latter should represent the interests of shareholders. Notably, sometimes top-level managers are on the board themselves.

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 ARB Corporation Limited. This is a big company, so it is good to see this level of alignment. Insiders own AU$211m worth of shares (at current prices). It is good to see this level of investment by insiders. You can check here to see if those insiders have been buying recently.

General Public Ownership

With a 41% ownership, the general public, mostly comprising of individual investors, have some degree of sway over ARB. 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:

I find it very interesting to look at who exactly owns a company. But to truly gain insight, we need to consider other information, too.

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.