Great week for Sims Limited (ASX:SGM) institutional investors after losing 1.7% over the previous year

Key Insights

• Institutions' substantial holdings in Sims implies that they have significant influence over the company's share price
• A total of 5 investors have a majority stake in the company with 52% ownership
• Analyst forecasts along with ownership data serve to give a strong idea about prospects for a business

Every investor in Sims Limited (ASX:SGM) should be aware of the most powerful shareholder groups. And the group that holds the biggest piece of the pie are institutions with 52% ownership. Put another way, the group faces the maximum upside potential (or downside risk).

Institutional investors would appreciate the 4.4% increase in share price last week, given their one-year losses have totalled a disappointing 1.7%.

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

See our latest analysis for Sims

What Does The Institutional Ownership Tell Us About Sims?

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.

We can see that Sims 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. 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 Sims, (below). Of course, keep in mind that there are other factors to consider, too.

Since institutional investors own more than half the issued stock, the board will likely have to pay attention to their preferences. Sims is not owned by hedge funds. Orbis Investment Management Limited is currently the company's largest shareholder with 19% of shares outstanding. With 17% and 6.2% of the shares outstanding respectively, Mitsui & Co., Ltd. and Yarra Funds Management Limited are the second and third largest shareholders.

To make our study more interesting, we found that the top 5 shareholders control more than half of the company which implies that this group has considerable sway over the company's decision-making.

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 Sims

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. 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.

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.

Our information suggests that Sims Limited insiders own under 1% of the company. It's a big company, so even a small proportional interest can create alignment between the board and shareholders. In this case insiders own AU$7.8m worth of shares. 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 30% stake in the company, and hence can't easily be ignored. While this group can't necessarily call the shots, it can certainly have a real influence on how the company is run.

Public Company Ownership

We can see that public companies hold 17% of the Sims shares on issue. It's hard to say for sure but this suggests they have entwined business interests. This might be a strategic stake, so it's worth watching this space for changes in ownership.

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. Consider risks, for instance. Every company has them, and we've spotted 2 warning signs for Sims you should know about.

If you would prefer discover what analysts are predicting in terms of future growth, do not miss this free report on analyst forecasts.

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.