Magazine Luiza S.A.'s (BVMF:MGLU3) stock price dropped 7.5% last week; private companies would not be happy

Key Insights

• The considerable ownership by private companies in Magazine Luiza indicates that they collectively have a greater say in management and business strategy
• 53% of the business is held by the top 2 shareholders
• Institutional ownership in Magazine Luiza is 19%

Every investor in Magazine Luiza S.A. (BVMF:MGLU3) should be aware of the most powerful shareholder groups. We can see that private companies own the lion's share in the company with 50% ownership. Put another way, the group faces the maximum upside potential (or downside risk).

And last week, private companies endured the biggest losses as the stock fell by 7.5%.

Let's delve deeper into each type of owner of Magazine Luiza, beginning with the chart below.

See our latest analysis for Magazine Luiza

What Does The Institutional Ownership Tell Us About Magazine Luiza?

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.

Magazine Luiza already has institutions on the share registry. Indeed, they own a respectable stake in the company. This suggests some credibility amongst professional investors. But we can't rely on that fact alone since institutions make bad investments sometimes, just like everyone does. 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 Magazine Luiza, (below). Of course, keep in mind that there are other factors to consider, too.

Hedge funds don't have many shares in Magazine Luiza. Looking at our data, we can see that the largest shareholder is LTD Administração e Participações S.A. with 47% of shares outstanding. Meanwhile, the second and third largest shareholders, hold 5.8% and 2.8%, of the shares outstanding, respectively.

A more detailed study of the shareholder registry showed us that 2 of the top shareholders have a considerable amount of ownership in the company, via their 53% stake.

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 plenty of analysts covering the stock, so it might be worth seeing what they are forecasting, too.

Insider Ownership Of Magazine Luiza

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.

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.

We can report that insiders do own shares in Magazine Luiza S.A.. The insiders have a meaningful stake worth R$179m. Most would see this as a real positive. It is good to see this level of investment by insiders. You can check here to see if those insiders have been buying recently.

General Public Ownership

With a 29% ownership, the general public, mostly comprising of individual investors, have some degree of sway over Magazine Luiza. 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.

Private Company Ownership

Our data indicates that Private Companies hold 50%, of the company's shares. 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 Magazine Luiza 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 Magazine Luiza , and understanding them should be part of your investment process.

But ultimately it is the future, not the past, that will determine how well the owners of this business will do. Therefore we think it advisable to take a look at this free report showing whether analysts are predicting a brighter 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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.