GrainCorp Limited's (ASX:GNC) recent 6.1% pullback adds to one-year year losses, institutional owners may take drastic measures

Key Insights

• Institutions' substantial holdings in GrainCorp implies that they have significant influence over the company's share price
• 50% 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 GrainCorp Limited (ASX:GNC), 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 60% to be precise, is institutions. Put another way, the group faces the maximum upside potential (or downside risk).

As a result, institutional investors endured the highest losses last week after market cap fell by AU$107m. This set of investors may especially be concerned about the current loss, which adds to a one-year loss of 6.2% 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 GrainCorp which might hurt individual investors.

In the chart below, we zoom in on the different ownership groups of GrainCorp.

See our latest analysis for GrainCorp

What Does The Institutional Ownership Tell Us About GrainCorp?

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 GrainCorp. This implies the analysts working for those institutions have looked at the stock and they like it. But just like anyone else, they could be wrong. 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 GrainCorp, (below). Of course, keep in mind that there are other factors to consider, too.

Investors should note that institutions actually own more than half the company, so they can collectively wield significant power. Hedge funds don't have many shares in GrainCorp. State Street Global Advisors, Inc. is currently the company's largest shareholder with 6.3% of shares outstanding. Dimensional Fund Advisors LP is the second largest shareholder owning 6.2% of common stock, and Norges Bank Investment Management holds about 5.2% of the company stock.

Looking at the shareholder registry, we can see that 50% of the ownership is controlled by the top 11 shareholders, meaning that no single shareholder has a majority interest in the ownership.

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 GrainCorp

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 information suggests that GrainCorp Limited insiders own under 1% of the company. Keep in mind that it's a big company, and the insiders own AU$14m 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

The general public-- including retail investors -- own 39% stake in the company, and hence can't easily be ignored. While this size of ownership may not be enough to sway a policy decision in their favour, they can still make a collective impact on company policies.

Next Steps:

It's always worth thinking about the different groups who own shares in a company. But to understand GrainCorp better, we need to consider many other factors. To that end, you should learn about the 3 warning signs we've spotted with GrainCorp (including 1 which can't be ignored) .

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.