Imdex Limited's (ASX:IMD) high institutional ownership speaks for itself as stock continues to impress, up 10% over last week

Key Insights

• Institutions' substantial holdings in Imdex implies that they have significant influence over the company's share price
• A total of 10 investors have a majority stake in the company with 52% ownership
• Insiders have been buying lately

Every investor in Imdex Limited (ASX:IMD) should be aware of the most powerful shareholder groups. The group holding the most number of shares in the company, around 65% to be precise, is institutions. Put another way, the group faces the maximum upside potential (or downside risk).

And last week, institutional investors ended up benefitting the most after the company hit AU$1.5b in market cap. One-year return to shareholders is currently 89% and last week’s gain was the icing on the cake.

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

View our latest analysis for Imdex

What Does The Institutional Ownership Tell Us About Imdex?

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 Imdex. 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 Imdex's earnings history below. Of course, the future is what really matters.

Institutional investors own over 50% of the company, so together than can probably strongly influence board decisions. We note that hedge funds don't have a meaningful investment in Imdex. L1 Capital Pty. Limited is currently the largest shareholder, with 13% of shares outstanding. FMR LLC is the second largest shareholder owning 9.4% of common stock, and Merrill Lynch & Co. Inc., Banking Investments holds about 5.0% of the company stock.

We did some more digging and found that 10 of the top shareholders account for roughly 52% of the register, implying that along with larger shareholders, there are a few smaller shareholders, thereby balancing out each others interests somewhat.

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 Imdex

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

I generally consider insider ownership to be a good thing. However, on some occasions it makes it more difficult for other shareholders to hold the board accountable for decisions.

Shareholders would probably be interested to learn that insiders own shares in Imdex Limited. As individuals, the insiders collectively own AU$27m worth of the AU$1.5b company. This shows at least some alignment. You can click here to see if those insiders have been buying or selling.

General Public Ownership

The general public-- including retail investors -- own 32% 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:

It's always worth thinking about the different groups who own shares in a company. But to understand Imdex better, we need to consider many other factors.

I like to dive deeper into how a company has performed in the past. You can access this interactive graph of past earnings, revenue and cash flow, for free.

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.