Deterra Royalties Limited's (ASX:DRR) recent 3.9% pullback adds to one-year year losses, institutional owners may take drastic measures

Key Insights

• Given the large stake in the stock by institutions, Deterra Royalties' stock price might be vulnerable to their trading decisions
• 53% of the business is held by the top 7 shareholders
• Recent purchases by insiders

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Every investor in Deterra Royalties Limited (ASX:DRR) should be aware of the most powerful shareholder groups. We can see that institutions own the lion's share in the company with 46% ownership. That is, the group stands to benefit the most if the stock rises (or lose the most if there is a downturn).

And so it follows that institutional investors was the group most impacted after the company's market cap fell to AU$2.0b last week after a 3.9% drop in the share price. The recent loss, which adds to a one-year loss of 3.7% for stockholders, may not sit well with this group of investors. 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 decline continues, institutional investors may be pressured to sell Deterra Royalties which might hurt individual investors.

Let's take a closer look to see what the different types of shareholders can tell us about Deterra Royalties.

Check out our latest analysis for Deterra Royalties

What Does The Institutional Ownership Tell Us About Deterra Royalties?

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 Deterra Royalties. 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. When multiple institutions own a stock, there's always a risk that they are in a 'crowded trade'. When such a trade goes wrong, multiple parties may compete to sell stock fast. This risk is higher in a company without a history of growth. You can see Deterra Royalties' historic earnings and revenue below, but keep in mind there's always more to the story.

Hedge funds don't have many shares in Deterra Royalties. Iluka Resources Limited is currently the largest shareholder, with 20% of shares outstanding. For context, the second largest shareholder holds about 6.8% of the shares outstanding, followed by an ownership of 6.1% by the third-largest shareholder.

On further inspection, we found that more than half the company's shares are owned by the top 7 shareholders, suggesting that the interests of the larger shareholders are balanced out to an extent by the smaller ones.

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 Deterra Royalties

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 most recent data indicates that insiders own less than 1% of Deterra Royalties Limited. Keep in mind that it's a big company, and the insiders own AU$4.1m worth of shares. The absolute value might be more important than the proportional share. Arguably, recent buying and selling is just as important to consider. You can click here to see if insiders have been buying or selling.

General Public Ownership

The general public-- including retail investors -- own 34% 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.

Public Company Ownership

We can see that public companies hold 20% of the Deterra Royalties shares on issue. This may be a strategic interest and the two companies may have related business interests. It could be that they have de-merged. This holding is probably worth investigating further.

Next Steps:

It's always worth thinking about the different groups who own shares in a company. But to understand Deterra Royalties better, we need to consider many other factors. Consider for instance, the ever-present spectre of investment risk. We've identified 3 warning signs with Deterra Royalties (at least 1 which is concerning) , and understanding them should be part of your investment process.

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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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.