Institutional owners may take dramatic actions as Reliance Worldwide Corporation Limited's (ASX:RWC) recent 11% drop adds to one-year losses

Key Insights

• Institutions' substantial holdings in Reliance Worldwide implies that they have significant influence over the company's share price
• 52% of the business is held by the top 11 shareholders
• Analyst forecasts along with ownership data serve to give a strong idea about prospects for a business

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. The group holding the most number of shares in the company, around 67% 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 AU$381m. Needless to say, the recent loss which further adds to the one-year loss to shareholders of 2.7% might not go down well especially with this category of shareholders. 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 downtrend continues, institutions may face pressures to sell Reliance Worldwide, which might have negative implications on individual investors.

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

Check out 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.

We can see that Reliance Worldwide does have institutional investors; and they hold a good portion of the company's stock. 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. Hedge funds don't have many shares in Reliance Worldwide. Our data shows that Australian Super Pty Ltd is the largest shareholder with 10.0% of shares outstanding. Meanwhile, the second and third largest shareholders, hold 8.6% and 5.9%, of the shares outstanding, respectively.

A closer look at our ownership figures suggests that the top 11 shareholders have a combined ownership of 52% implying that no single shareholder has a majority.

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

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. Company management run the business, but the CEO will answer to the board, even if he or she is a member of it.

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.

Our information suggests that Reliance Worldwide Corporation Limited insiders own under 1% of the company. Keep in mind that it's a big company, and the insiders own AU$7.9m worth of shares. The absolute value might be more important than the proportional share. It is good to see board members owning shares, but it might be worth checking if those insiders have been buying.

General Public Ownership

With a 29% ownership, the general public, mostly comprising of individual investors, have some degree of sway over Reliance Worldwide. 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:

While it is well worth considering the different groups that own a company, there are other factors that are even more important. Take risks for example - Reliance Worldwide has 1 warning sign we think 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.

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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.