Every investor in REA Group Limited (ASX:REA) should be aware of the most powerful shareholder groups. Large companies usually have institutions as shareholders, and we usually see insiders owning shares in smaller companies. We also tend to see lower insider ownership in companies that were previously publicly owned.
With a market capitalization of AU$12b, REA Group is rather large. We’d expect to see institutional investors on the register. Companies of this size are usually well known to retail investors, too. Our analysis of the ownership of the company, below, shows that institutions are noticeable on the share registry. We can zoom in on the different ownership groups, to learn more about REA.
What Does The Institutional Ownership Tell Us About REA Group?
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 REA Group does have institutional investors; and they hold 19% of the 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 REA Group’s historic earnings and revenue, below, but keep in mind there’s always more to the story.
REA Group is not owned by hedge funds. 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 REA Group
The definition of an insider can differ slightly between different countries, but members of the board of directors always count. The company management answer to the board; and the latter should represent the interests of shareholders. Notably, sometimes top-level managers are on the board, themselves.
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 information suggests that REA Group Limited insiders own under 1% of the company. As it is a large company, we’d only expect insiders to own a small percentage of it. But it’s worth noting that they own AU$55m 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
With a 19% ownership, the general public have some degree of sway over REA. 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
Public companies currently own 62% of REA stock. 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.
While it is well worth considering the different groups that own a company, there are other factors that are even more important.
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.
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.
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.
If you spot an error that warrants correction, please contact the editor at firstname.lastname@example.org. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned. Thank you for reading.