Stock Analysis

Both individual investors who control a good portion of Santos Limited (ASX:STO) along with institutions must be dismayed after last week's 6.3% decrease

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ASX:STO
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If you want to know who really controls Santos Limited (ASX:STO), then you'll have to look at the makeup of its share registry. We can see that individual investors own the lion's share in the company with 58% ownership. Put another way, the group faces the maximum upside potential (or downside risk).

Following a 6.3% decrease in the stock price last week, individual investors suffered the most losses, but institutions who own 37% stock also took a hit.

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

Check out the opportunities and risks within the AU Oil and Gas industry.

ownership-breakdown
ASX:STO Ownership Breakdown November 12th 2022

What Does The Institutional Ownership Tell Us About Santos?

Many institutions measure their performance against an index that approximates the local market. So they usually pay more attention to companies that are included in major indices.

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

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ASX:STO Earnings and Revenue Growth November 12th 2022

Hedge funds don't have many shares in Santos. Looking at our data, we can see that the largest shareholder is State Street Global Advisors, Inc. with 5.1% of shares outstanding. For context, the second largest shareholder holds about 5.1% of the shares outstanding, followed by an ownership of 4.1% by the third-largest shareholder.

On studying our ownership data, we found that 25 of the top shareholders collectively own less than 50% of the share register, implying that no single individual has a majority interest.

While studying institutional ownership for a company can add value to your research, it is also a good practice to research analyst recommendations to get a deeper understand of a stock's expected performance. 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 Santos

The definition of an insider can differ slightly between different countries, but members of the board of directors always count. 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.

Most consider insider ownership a positive because it can indicate the board is well aligned with other shareholders. However, on some occasions too much power is concentrated within this group.

Our data suggests that insiders own under 1% of Santos Limited in their own names. We do note, however, it is possible insiders have an indirect interest through a private company or other corporate structure. It is a very large company, so it would be surprising to see insiders own a large proportion of the company. Though their holding amounts to less than 1%, we can see that board members collectively own AU$27m worth of shares (at current prices). It is always good to see at least some insider ownership, but it might be worth checking if those insiders have been selling.

General Public Ownership

The general public -- including retail investors -- own 58% of Santos. With this amount of ownership, retail investors can collectively play a role in decisions that affect shareholder returns, such as dividend policies and the appointment of directors. They can also exercise the power to vote on acquisitions or mergers that may not improve profitability.

Private Company Ownership

It seems that Private Companies own 5.2%, of the Santos 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:

While it is well worth considering the different groups that own a company, there are other factors that are even more important. Case in point: We've spotted 3 warning signs for Santos you should be aware of, and 2 of them are concerning.

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.

Valuation is complex, but we're helping make it simple.

Find out whether Santos is potentially over or undervalued by checking out our comprehensive analysis, which includes fair value estimates, risks and warnings, dividends, insider transactions and financial health.

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