Stock Analysis

The recent 6.4% gain must have brightened Senior Key Executive Michael Heine's week, Netwealth Group Limited's (ASX:NWL) most bullish insider

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If you want to know who really controls Netwealth Group Limited (ASX:NWL), then you'll have to look at the makeup of its share registry. With 54% stake, individual insiders possess the maximum shares in the company. Put another way, the group faces the maximum upside potential (or downside risk).

Clearly, insiders benefitted the most after the company's market cap rose by AU$200m last week.

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

See our latest analysis for Netwealth Group

ASX:NWL Ownership Breakdown February 5th 2023

What Does The Institutional Ownership Tell Us About Netwealth Group?

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.

Netwealth Group already has institutions on the share registry. Indeed, they own a respectable stake in the company. 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. If multiple institutions change their view on a stock at the same time, you could see the share price drop fast. It's therefore worth looking at Netwealth Group's earnings history below. Of course, the future is what really matters.

ASX:NWL Earnings and Revenue Growth February 5th 2023

We note that hedge funds don't have a meaningful investment in Netwealth Group. Our data suggests that Michael Heine, who is also the company's Senior Key Executive, holds the most number of shares at 51%. When an insider holds a sizeable amount of a company's stock, investors consider it as a positive sign because it suggests that insiders are willing to have their wealth tied up in the future of the company. Meanwhile, the second and third largest shareholders, hold 7.2% and 1.8%, of the shares outstanding, respectively. Additionally, the company's CEO Matthew Alexander Heine directly holds 1.5% of the total shares outstanding.

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 Netwealth Group

While the precise definition of an insider can be subjective, almost everyone considers board members to be insiders. Management ultimately answers to the board. However, it is not uncommon for managers to be executive board members, especially if they are a founder or the CEO.

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 insiders own more than half of Netwealth Group Limited. This gives them effective control of the company. Insiders own AU$1.8b worth of shares in the AU$3.3b company. That's extraordinary! Most would argue this is a positive, showing strong alignment with shareholders. You can click here to see if they have been selling down their stake.

General Public Ownership

The general public-- including retail investors -- own 29% stake in the company, and hence can't easily be ignored. 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.

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.

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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