Recent uptick might appease Fortescue Ltd (ASX:FMG) institutional owners after losing 28% over the past year

Key Insights

• Given the large stake in the stock by institutions, Fortescue's stock price might be vulnerable to their trading decisions
• 52% of the business is held by the top 4 shareholders
• Ownership research along with analyst forecasts data help provide a good understanding of opportunities in a stock

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To get a sense of who is truly in control of Fortescue Ltd (ASX:FMG), it is important to understand the ownership structure of the business. And the group that holds the biggest piece of the pie are institutions with 54% ownership. That is, the group stands to benefit the most if the stock rises (or lose the most if there is a downturn).

Institutional investors would appreciate the 4.2% increase in share price last week, given their one-year losses have totalled a disappointing 28%.

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

View our latest analysis for Fortescue

What Does The Institutional Ownership Tell Us About Fortescue?

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.

We can see that Fortescue does have institutional investors; and they hold a good portion of the company's stock. 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 Fortescue's historic earnings and revenue below, but keep in mind there's always more to the story.

Since institutional investors own more than half the issued stock, the board will likely have to pay attention to their preferences. We note that hedge funds don't have a meaningful investment in Fortescue. Tattarang Pty Ltd is currently the company's largest shareholder with 35% of shares outstanding. With 8.8% and 5.0% of the shares outstanding respectively, Valin Holdings Group Co.,Ltd. and Capital Research and Management Company are the second and third largest shareholders.

On looking further, we found that 52% of the shares are owned by the top 4 shareholders. In other words, these shareholders have a meaningful say in the decisions of the company.

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 Fortescue

The definition of company insiders can be subjective and does vary between jurisdictions. Our data reflects individual insiders, capturing board members at the very least. Company management run the business, but the CEO will answer to the board, even if he or she is a member of it.

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.

We can see that insiders own shares in Fortescue Ltd. The insiders have a meaningful stake worth AU$857m. It is good to see this level of investment. You can check here to see if those insiders have been buying recently.

General Public Ownership

The general public, who are usually individual investors, hold a 32% stake in Fortescue. 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.

Private Company Ownership

Our data indicates that Private Companies hold 12%, of the company's shares. It might be worth looking deeper into this. If related parties, such as insiders, have an interest in one of these private companies, that should be disclosed in the annual report. Private companies may also have a strategic interest in the company.

Next Steps:

It's always worth thinking about the different groups who own shares in a company. But to understand Fortescue better, we need to consider many other factors. For example, we've discovered 2 warning signs for Fortescue (1 is a bit unpleasant!) that you should be aware of before investing here.

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.