Institutional investors are Valid Soluções S.A.'s (BVMF:VLID3) biggest bettors and were rewarded after last week's R$147m market cap gain

Key Insights

• Institutions' substantial holdings in Valid Soluções implies that they have significant influence over the company's share price
• The top 4 shareholders own 53% of the company
• Ownership research, combined with past performance data can help provide a good understanding of opportunities in a stock

Every investor in Valid Soluções S.A. (BVMF:VLID3) should be aware of the most powerful shareholder groups. And the group that holds the biggest piece of the pie are institutions with 68% ownership. In other words, the group stands to gain the most (or lose the most) from their investment into the company.

And things are looking up for institutional investors after the company gained R$147m in market cap last week. The gains from last week would have further boosted the one-year return to shareholders which currently stand at 86%.

In the chart below, we zoom in on the different ownership groups of Valid Soluções.

See our latest analysis for Valid Soluções

What Does The Institutional Ownership Tell Us About Valid Soluções?

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.

We can see that Valid Soluções does have institutional investors; and they hold a good portion of the company's stock. 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 Valid Soluções, (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. Hedge funds don't have many shares in Valid Soluções. Looking at our data, we can see that the largest shareholder is Alaska Investimentos LTDA. with 27% of shares outstanding. Meanwhile, the second and third largest shareholders, hold 11% and 9.4%, of the shares outstanding, respectively.

On looking further, we found that 53% of the shares are owned by the top 4 shareholders. In other words, these shareholders have a meaningful say in the decisions of the company.

While it makes sense to study institutional ownership data for a company, it also makes sense to study analyst sentiments to know which way the wind is blowing. Our information suggests that there isn't any analyst coverage of the stock, so it is probably little known.

Insider Ownership Of Valid Soluções

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. 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.

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.

We note our data does not show any board members holding shares, personally. It is unusual not to have at least some personal holdings by board members, so our data might be flawed. A good next step would be to check how much the CEO is paid.

General Public Ownership

The general public, who are usually individual investors, hold a 32% stake in Valid Soluções. While this group can't necessarily call the shots, it can certainly have a real influence on how the company is run.

Next Steps:

It's always worth thinking about the different groups who own shares in a company. But to understand Valid Soluções better, we need to consider many other factors. Consider for instance, the ever-present spectre of investment risk. We've identified 2 warning signs with Valid Soluções , and understanding them should be part of your investment process.

Of course this may not be the best stock to buy. So take a peek at this free free list of interesting companies.

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.