Institutional investors have a lot riding on Sandfire Resources Limited (ASX:SFR) with 72% ownership

Key Insights

• Institutions' substantial holdings in Sandfire Resources implies that they have significant influence over the company's share price
• A total of 8 investors have a majority stake in the company with 52% ownership
• Using data from analyst forecasts alongside ownership research, one can better assess the future performance of a company

This technology could replace computers: discover the 20 stocks are working to make quantum computing a reality.

To get a sense of who is truly in control of Sandfire Resources Limited (ASX:SFR), 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 72% ownership. In other words, the group stands to gain the most (or lose the most) from their investment into the company.

Last week’s 8.2% gain means that institutional investors were on the positive end of the spectrum even as the company has shown strong longer-term trends. One-year return to shareholders is currently 65% and last week’s gain was the icing on the cake.

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

Check out our latest analysis for Sandfire Resources

What Does The Institutional Ownership Tell Us About Sandfire Resources?

Institutions typically measure themselves against a benchmark when reporting to their own investors, so they often become more enthusiastic about a stock once it's included in a major index. We would expect most companies to have some institutions on the register, especially if they are growing.

Sandfire Resources already has institutions on the share registry. Indeed, they own a respectable stake in the company. 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. 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 Sandfire Resources' 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 Sandfire Resources. Our data shows that Australian Super Pty Ltd is the largest shareholder with 13% of shares outstanding. Meanwhile, the second and third largest shareholders, hold 8.6% and 6.6%, of the shares outstanding, respectively.

On further inspection, we found that more than half the company's shares are owned by the top 8 shareholders, suggesting that the interests of the larger shareholders are balanced out to an extent by the smaller ones.

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. 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 Sandfire Resources

While the precise definition of an insider can be subjective, almost everyone considers board members to be insiders. 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.

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 Sandfire Resources Limited. It is a pretty big company, so it would be possible for board members to own a meaningful interest in the company, without owning much of a proportional interest. In this case, they own around AU$16m worth of shares (at current prices). It is good to see board members owning shares, but it might be worth checking if those insiders have been buying.

General Public Ownership

With a 27% ownership, the general public, mostly comprising of individual investors, have some degree of sway over Sandfire Resources. 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:

While it is well worth considering the different groups that own a company, there are other factors that are even more important.

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.

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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.