Westgold Resources Limited's (ASX:WGX) large institutional owners must be happy as stock continues to impress, up 9.5% over the past week

By
Simply Wall St
Published
February 19, 2022
ASX:WGX
Source: Shutterstock

A look at the shareholders of Westgold Resources Limited (ASX:WGX) can tell us which group is most powerful. The group holding the most number of shares in the company, around 67% to be precise, is institutions. Put another way, the group faces the maximum upside potential (or downside risk).

Last week’s 9.5% gain means that institutional investors were on the positive end of the spectrum even as the company has shown strong longer-term trends. The gains from last week would have further boosted the one-year return to shareholders which currently stand at 12%.

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

View our latest analysis for Westgold Resources

ownership-breakdown
ASX:WGX Ownership Breakdown February 19th 2022

What Does The Institutional Ownership Tell Us About Westgold 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.

Westgold 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. 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 Westgold Resources, (below). Of course, keep in mind that there are other factors to consider, too.

earnings-and-revenue-growth
ASX:WGX Earnings and Revenue Growth February 19th 2022

Investors should note that institutions actually own more than half the company, so they can collectively wield significant power. Hedge funds don't have many shares in Westgold Resources. The company's largest shareholder is Ruffer LLP, with ownership of 9.0%. In comparison, the second and third largest shareholders hold about 8.0% and 6.1% of the stock.

We also observed that the top 9 shareholders account for more than half of the share register, with a few smaller shareholders to balance the interests of the larger ones to a certain extent.

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. While there is some analyst coverage, the company is probably not widely covered. So it could gain more attention, down the track.

Insider Ownership Of Westgold 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 some shares in Westgold Resources Limited. In their own names, insiders own AU$34m worth of stock in the AU$906m 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, who are usually individual investors, hold a 24% stake in Westgold Resources. 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

It appears to us that public companies own 4.5% of Westgold Resources. 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 Westgold Resources better, we need to consider many other factors.

I always like to check for a history of revenue growth. You can too, by accessing this free chart of historic revenue and earnings in this detailed graph.

If you are like me, you may want to think about whether this company will grow or shrink. Luckily, you can check this free report showing analyst forecasts for its 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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