Institutional investors may adopt severe steps after Reliance Worldwide Corporation Limited's (ASX:RWC) latest 3.8% drop adds to a year losses

Key Insights

• Institutions' substantial holdings in Reliance Worldwide implies that they have significant influence over the company's share price
• 51% of the business is held by the top 9 shareholders
• Analyst forecasts along with ownership data serve to give a strong idea about prospects for a business

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If you want to know who really controls Reliance Worldwide Corporation Limited (ASX:RWC), then you'll have to look at the makeup of its share registry. And the group that holds the biggest piece of the pie are institutions with 67% ownership. That is, the group stands to benefit the most if the stock rises (or lose the most if there is a downturn).

And institutional investors endured the highest losses after the company's share price fell by 3.8% last week. This set of investors may especially be concerned about the current loss, which adds to a one-year loss of 23% for shareholders. Also referred to as "smart money", institutions have a lot of sway over how a stock's price moves. As a result, if the decline continues, institutional investors may be pressured to sell Reliance Worldwide which might hurt individual investors.

Let's take a closer look to see what the different types of shareholders can tell us about Reliance Worldwide.

See our latest analysis for Reliance Worldwide

What Does The Institutional Ownership Tell Us About Reliance Worldwide?

Institutional investors commonly compare their own returns to the returns of a commonly followed index. So they generally do consider buying larger companies that are included in the relevant benchmark index.

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

Since institutional investors own more than half the issued stock, the board will likely have to pay attention to their preferences. We note that hedge funds don't have a meaningful investment in Reliance Worldwide. Our data shows that Australian Super Pty Ltd is the largest shareholder with 11% of shares outstanding. State Street Global Advisors, Inc. is the second largest shareholder owning 7.1% of common stock, and Aware Super Pty Ltd holds about 6.4% of the company stock.

On further inspection, we found that more than half the company's shares are owned by the top 9 shareholders, suggesting that the interests of the larger shareholders are balanced out to an extent by the smaller ones.

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. Quite a few analysts cover the stock, so you could look into forecast growth quite easily.

Insider Ownership Of Reliance Worldwide

While the precise definition of an insider can be subjective, almost everyone considers board members to be insiders. 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.

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 data suggests that insiders own under 1% of Reliance Worldwide Corporation Limited in their own names. It is a pretty big company, so it would be possible for board members to own a meaningful interest in the company, without owning much of a proportional interest. In this case, they own around AU$9.4m worth of shares (at current prices). It is good to see board members owning shares, but it might be worth checking if those insiders have been buying.

General Public Ownership

The general public, who are usually individual investors, hold a 31% stake in Reliance Worldwide. 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 Reliance Worldwide better, we need to consider many other factors.

I always like to check for a history of revenue growth. You can too, by accessing this free chart of historic revenue and earnings in this detailed graph.

Ultimately the future is most important. You can access this free report on analyst forecasts for the company.

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.