Institutional owners may take dramatic actions as Vale S.A.'s (BVMF:VALE3) recent 4.4% drop adds to one-year losses

Key Insights

• Institutions' substantial holdings in Vale implies that they have significant influence over the company's share price
• The top 21 shareholders own 50% of the company
• Using data from analyst forecasts alongside ownership research, one can better assess the future performance of a company

If you want to know who really controls Vale S.A. (BVMF:VALE3), then you'll have to look at the makeup of its share registry. With 58% stake, institutions possess the maximum shares in the company. In other words, the group stands to gain the most (or lose the most) from their investment into the company.

As a result, institutional investors endured the highest losses last week after market cap fell by R$12b. The recent loss, which adds to a one-year loss of 2.0% for stockholders, may not sit well with this group of investors. Institutions or "liquidity providers" control large sums of money and therefore, these types of investors usually have a lot of influence over stock price movements. Hence, if weakness in Vale's share price continues, institutional investors may feel compelled to sell the stock, which might not be ideal for individual investors.

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

Check out our latest analysis for Vale

What Does The Institutional Ownership Tell Us About Vale?

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 Vale 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. If multiple institutions change their view on a stock at the same time, you could see the share price drop fast. It's therefore worth looking at Vale's earnings history below. Of course, the future is what really matters.

Institutional investors own over 50% of the company, so together than can probably strongly influence board decisions. Hedge funds don't have many shares in Vale. Capital Research and Management Company is currently the company's largest shareholder with 14% of shares outstanding. For context, the second largest shareholder holds about 9.3% of the shares outstanding, followed by an ownership of 7.2% by the third-largest shareholder.

Looking at the shareholder registry, we can see that 50% of the ownership is controlled by the top 21 shareholders, meaning that no single shareholder has a majority interest in the ownership.

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. 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 Vale

The definition of an insider can differ slightly between different countries, but members of the board of directors always count. Company management run the business, but the CEO will answer to the board, even if he or she is a member of it.

I generally consider insider ownership to be a good thing. However, on some occasions it makes it more difficult for other shareholders to hold the board accountable for decisions.

Our data cannot confirm that board members are holding shares personally. Given we are not picking up on insider ownership, we may have missing data. Therefore, it would be interesting to assess the CEO compensation and tenure, here.

General Public Ownership

The general public-- including retail investors -- own 36% stake in the company, and hence can't easily be ignored. This size of ownership, while considerable, may not be enough to change company policy if the decision is not in sync with other large shareholders.

Public Company Ownership

We can see that public companies hold 6.7% of the Vale shares on issue. We can't be certain but it is quite possible this is a strategic stake. The businesses may be similar, or work together.

Next Steps:

While it is well worth considering the different groups that own a company, there are other factors that are even more important. Take risks for example - Vale has 2 warning signs we think you should be aware of.

If you would prefer discover what analysts are predicting in terms of future growth, do not miss this free report on analyst forecasts.

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.