Institutional owners may consider drastic measures as Qualicorp Consultoria e Corretora de Seguros S.A.'s (BVMF:QUAL3) recent R$400m drop adds to long-term losses

By
Simply Wall St
Published
November 24, 2021
BOVESPA:QUAL3
Source: Shutterstock

A look at the shareholders of Qualicorp Consultoria e Corretora de Seguros S.A. (BVMF:QUAL3) can tell us which group is most powerful. And the group that holds the biggest piece of the pie are institutions with 45% ownership. That is, the group stands to benefit the most if the stock rises (or lose the most if there is a downturn).

And so it follows that institutional investors was the group most impacted after the company's market cap fell to R$4.7b last week after a 7.9% drop in the share price. The recent loss, which adds to a one-year loss of 48% for stockholders, may not sit well with this group of investors. Often called “market makers”, institutions wield significant power in influencing the price dynamics of any stock. As a result, if the downtrend continues, institutions may face pressures to sell Qualicorp Consultoria e Corretora de Seguros, which might have negative implications on individual investors.

In the chart below, we zoom in on the different ownership groups of Qualicorp Consultoria e Corretora de Seguros.

See our latest analysis for Qualicorp Consultoria e Corretora de Seguros

ownership-breakdown
BOVESPA:QUAL3 Ownership Breakdown November 24th 2021

What Does The Institutional Ownership Tell Us About Qualicorp Consultoria e Corretora de Seguros?

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 Qualicorp Consultoria e Corretora de Seguros does have institutional investors; and they hold a good portion of the company's stock. This implies the analysts working for those institutions have looked at the stock and they like it. But just like anyone else, they could be wrong. 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 Qualicorp Consultoria e Corretora de Seguros' historic earnings and revenue below, but keep in mind there's always more to the story.

earnings-and-revenue-growth
BOVESPA:QUAL3 Earnings and Revenue Growth November 24th 2021

We note that hedge funds don't have a meaningful investment in Qualicorp Consultoria e Corretora de Seguros. Rede D'Or São Luiz S.A. is currently the largest shareholder, with 26% of shares outstanding. For context, the second largest shareholder holds about 15% of the shares outstanding, followed by an ownership of 7.1% by the third-largest shareholder.

On looking further, we found that 54% 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 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 Qualicorp Consultoria e Corretora de Seguros

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.

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 data cannot confirm that board members are holding shares personally. Not all jurisdictions have the same rules around disclosing insider ownership, and it is possible we have missed something, here. So you can click here learn more about the CEO.

General Public Ownership

The general public-- including retail investors -- own 14% stake in the company, and hence can't easily be ignored. While this group can't necessarily call the shots, it can certainly have a real influence on how the company is run.

Private Equity Ownership

With a stake of 15%, private equity firms could influence the Qualicorp Consultoria e Corretora de Seguros board. Some investors might be encouraged by this, since private equity are sometimes able to encourage strategies that help the market see the value in the company. Alternatively, those holders might be exiting the investment after taking it public.

Public Company Ownership

It appears to us that public companies own 26% of Qualicorp Consultoria e Corretora de Seguros. 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.

Next Steps:

It's always worth thinking about the different groups who own shares in a company. But to understand Qualicorp Consultoria e Corretora de Seguros better, we need to consider many other factors. Consider risks, for instance. Every company has them, and we've spotted 2 warning signs for Qualicorp Consultoria e Corretora de Seguros you should know about.

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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