Do Insiders Own Lots Of Shares In Reece Limited (ASX:REH)?

By
Simply Wall St
Published
January 05, 2022
ASX:REH
Source: Shutterstock

The big shareholder groups in Reece Limited (ASX:REH) have power over the company. Insiders often own a large chunk of younger, smaller, companies while huge companies tend to have institutions as shareholders. I generally like to see some degree of insider ownership, even if only a little. As Nassim Nicholas Taleb said, 'Don’t tell me what you think, tell me what you have in your portfolio.

With a market capitalization of AU$18b, Reece is rather large. We'd expect to see institutional investors on the register. Companies of this size are usually well known to retail investors, too. Taking a look at our data on the ownership groups (below), it seems that institutions are noticeable on the share registry. We can zoom in on the different ownership groups, to learn more about Reece.

Check out our latest analysis for Reece

ownership-breakdown
ASX:REH Ownership Breakdown January 5th 2022

What Does The Institutional Ownership Tell Us About Reece?

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 Reece. 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. 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 Reece, (below). Of course, keep in mind that there are other factors to consider, too.

earnings-and-revenue-growth
ASX:REH Earnings and Revenue Growth January 5th 2022

Reece is not owned by hedge funds. The company's largest shareholder is L.T. Wilson Pty Ltd., with ownership of 24%. For context, the second largest shareholder holds about 9.3% of the shares outstanding, followed by an ownership of 7.5% by the third-largest shareholder.

Our research also brought to light the fact that roughly 54% of the company is controlled by the top 5 shareholders suggesting that these owners wield significant influence on the business.

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 Reece

The definition of an insider can differ slightly between different countries, but members of the board of directors always count. Company management run the business, but the CEO will answer to the board, even if he or she is a member of it.

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 most recent data indicates that insiders own a reasonable proportion of Reece Limited. Insiders own AU$2.3b worth of shares in the AU$18b company. That's quite meaningful. 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

With a 18% ownership, the general public, mostly comprising of individual investors, have some degree of sway over Reece. 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 Company Ownership

It seems that Private Companies own 56%, of the Reece 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:

It's always worth thinking about the different groups who own shares in a company. But to understand Reece better, we need to consider many other factors. Case in point: We've spotted 1 warning sign for Reece you should be aware of.

If you would prefer discover what analysts are predicting in terms of future growth, do not miss this free report on analyst forecasts.

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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