Institutional investors may adopt severe steps after MRV Engenharia e Participações S.A.'s (BVMF:MRVE3) latest 10% drop adds to a year losses

Published
June 11, 2022
BOVESPA:MRVE3
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If you want to know who really controls MRV Engenharia e Participações S.A. (BVMF:MRVE3), then you'll have to look at the makeup of its share registry. And the group that holds the biggest piece of the pie are institutions with 41% ownership. Put another way, the group faces the maximum upside potential (or downside risk).

As a result, institutional investors endured the highest losses last week after market cap fell by R$469m. This set of investors may especially be concerned about the current loss, which adds to a one-year loss of 50% for shareholders. Also referred to as "smart money", institutions have a lot of sway over how a stock's price moves. Hence, if weakness in MRV Engenharia e Participações' share price continues, institutional investors may feel compelled to sell the stock, which might not be ideal for individual investors.

Let's delve deeper into each type of owner of MRV Engenharia e Participações, beginning with the chart below.

See our latest analysis for MRV Engenharia e Participações

ownership-breakdown
BOVESPA:MRVE3 Ownership Breakdown June 11th 2022

What Does The Institutional Ownership Tell Us About MRV Engenharia e Participações?

Many institutions measure their performance against an index that approximates the local market. So they usually pay more attention to companies that are included in major indices.

As you can see, institutional investors have a fair amount of stake in MRV Engenharia e Participações. 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 MRV Engenharia e Participações' historic earnings and revenue below, but keep in mind there's always more to the story.

earnings-and-revenue-growth
BOVESPA:MRVE3 Earnings and Revenue Growth June 11th 2022

We note that hedge funds don't have a meaningful investment in MRV Engenharia e Participações. Because actions speak louder than words, we consider it a good sign when insiders own a significant stake in a company. In MRV Engenharia e Participações' case, its Top Key Executive, Rubens Menin de Souza, is the largest shareholder, holding 38% of shares outstanding. Atmos Capital Gestao de Recursos Ltda is the second largest shareholder owning 9.7% of common stock, and Morgan Stanley, Investment Banking and Brokerage Investments holds about 4.8% of the company stock.

To make our study more interesting, we found that the top 3 shareholders have a majority ownership in the company, meaning that they are powerful enough to influence the decisions of the company.

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. 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 MRV Engenharia e Participações

While the precise definition of an insider can be subjective, almost everyone considers board members to be insiders. Company management run the business, but the CEO will answer to the board, even if he or she is a member of it.

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 most recent data indicates that insiders own a reasonable proportion of MRV Engenharia e Participações S.A.. It has a market capitalization of just R$4.1b, and insiders have R$1.5b worth of shares in their own names. It is great to see insiders so invested in the business. It might be worth checking if those insiders have been buying recently.

General Public Ownership

With a 22% ownership, the general public, mostly comprising of individual investors, have some degree of sway over MRV Engenharia e Participações. 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.

Next Steps:

While it is well worth considering the different groups that own a company, there are other factors that are even more important. For example, we've discovered 4 warning signs for MRV Engenharia e Participações (1 makes us a bit uncomfortable!) that you should be aware of before investing here.

Ultimately the future is most important. You can access this free report on analyst forecasts for the company.

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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About BOVESPA:MRVE3

MRV Engenharia e Participações

MRV Engenharia e Participações S.A., together with its subsidiaries, operates as a real estate developer and homebuilder in Brazil and the United States.

The Snowflake is a visual investment summary with the score of each axis being calculated by 6 checks in 5 areas.

Analysis AreaScore (0-6)
Valuation2
Future Growth0
Past Performance1
Financial Health1
Dividends3

Read more about these checks in the individual report sections or in our analysis model.

Second-rate dividend payer and slightly overvalued.