With 41% ownership, Harvey Norman Holdings Limited (ASX:HVN) insiders have a lot at stake

Key Insights

• Insiders appear to have a vested interest in Harvey Norman Holdings' growth, as seen by their sizeable ownership
• 50% of the business is held by the top 2 shareholders
• Institutions own 13% of Harvey Norman Holdings

Every investor in Harvey Norman Holdings Limited (ASX:HVN) should be aware of the most powerful shareholder groups. And the group that holds the biggest piece of the pie are individual insiders with 41% ownership. Put another way, the group faces the maximum upside potential (or downside risk).

So it follows, every decision made by insiders of Harvey Norman Holdings regarding the company's future would be crucial to them.

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

See our latest analysis for Harvey Norman Holdings

What Does The Institutional Ownership Tell Us About Harvey Norman Holdings?

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.

Harvey Norman Holdings 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 Harvey Norman Holdings' historic earnings and revenue below, but keep in mind there's always more to the story.

We note that hedge funds don't have a meaningful investment in Harvey Norman Holdings. Our data suggests that Gerald Harvey, who is also the company's Top Key Executive, holds the most number of shares at 34%. When an insider holds a sizeable amount of a company's stock, investors consider it as a positive sign because it suggests that insiders are willing to have their wealth tied up in the future of the company. Dimbulu Pty Ltd is the second largest shareholder owning 16% of common stock, and Margaret Harvey holds about 4.7% of the company stock. Furthermore, CEO Kay Lesley Page is the owner of 1.6% of the company's shares.

To make our study more interesting, we found that the top 2 shareholders have a majority ownership in the company, meaning that they are powerful enough to influence the decisions of the company.

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. Quite a few analysts cover the stock, so you could look into forecast growth quite easily.

Insider Ownership Of Harvey Norman Holdings

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 insiders maintain a significant holding in Harvey Norman Holdings Limited. It is very interesting to see that insiders have a meaningful AU$2.2b stake in this AU$5.2b business. Most would say this shows a good degree of alignment with shareholders, especially in a company of this size. 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 27% stake in Harvey Norman Holdings. While this group can't necessarily call the shots, it can certainly have a real influence on how the company is run.

Private Company Ownership

We can see that Private Companies own 18%, of the shares on issue. It might be worth looking deeper into this. If related parties, such as insiders, have an interest in one of these private companies, that should be disclosed in the annual report. Private companies may also have a strategic interest in the company.

Next Steps:

It's always worth thinking about the different groups who own shares in a company. But to understand Harvey Norman Holdings better, we need to consider many other factors. To that end, you should learn about the 2 warning signs we've spotted with Harvey Norman Holdings (including 1 which shouldn't be ignored) .

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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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.