Base Resources Limited's (ASX:BSE) institutional investors lost 15% last week but have benefitted from longer-term gains

Key Insights

• Given the large stake in the stock by institutions, Base Resources' stock price might be vulnerable to their trading decisions
• 54% of the business is held by the top 3 shareholders
• Ownership research along with analyst forecasts data help provide a good understanding of opportunities in a stock

A look at the shareholders of Base Resources Limited (ASX:BSE) can tell us which group is most powerful. And the group that holds the biggest piece of the pie are institutions with 27% ownership. That is, the group stands to benefit the most if the stock rises (or lose the most if there is a downturn).

No shareholder likes losing money on their investments, especially institutional investors who saw their holdings drop 15% in value last week. However, the 33% one-year return to shareholders might have softened the blow. But they would probably be wary of future losses.

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

View our latest analysis for Base Resources

What Does The Institutional Ownership Tell Us About Base Resources?

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 Base Resources. 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 Base Resources, (below). Of course, keep in mind that there are other factors to consider, too.

It would appear that 21% of Base Resources shares are controlled by hedge funds. That's interesting, because hedge funds can be quite active and activist. Many look for medium term catalysts that will drive the share price higher. Pacific Road Capital Management Pty Limited is currently the company's largest shareholder with 27% of shares outstanding. Meanwhile, the second and third largest shareholders, hold 21% and 6.5%, of the shares outstanding, respectively. In addition, we found that Timothy Carstens, the CEO has 1.1% of the shares allocated to their name.

To make our study more interesting, we found that the top 3 shareholders have a majority ownership in the company, meaning that they are powerful enough to influence the decisions of the company.

While it makes sense to study institutional ownership data for a company, it also makes sense to study analyst sentiments to know which way the wind is blowing. There are plenty of analysts covering the stock, so it might be worth seeing what they are forecasting, too.

Insider Ownership Of Base Resources

The definition of an insider can differ slightly between different countries, but members of the board of directors always count. Company management run the business, but the CEO will answer to the board, even if he or she is a member of it.

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.

We can report that insiders do own shares in Base Resources Limited. As individuals, the insiders collectively own AU$8.6m worth of the AU$262m company. Some would say this shows alignment of interests between shareholders and the board, though we generally prefer to see bigger insider holdings. But it might be worth checking if those insiders have been selling.

General Public Ownership

The general public, who are usually individual investors, hold a 20% stake in Base Resources. While this group can't necessarily call the shots, it can certainly have a real influence on how the company is run.

Private Equity Ownership

With an ownership of 27%, private equity firms are in a position to play a role in shaping corporate strategy with a focus on value creation. Sometimes we see private equity stick around for the long term, but generally speaking they have a shorter investment horizon and -- as the name suggests -- don't invest in public companies much. After some time they may look to sell and redeploy capital elsewhere.

Next Steps:

I find it very interesting to look at who exactly owns a company. But to truly gain insight, we need to consider other information, too.

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.

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.