Localiza Rent a Car S.A.'s (BVMF:RENT3) recent 9.2% pullback adds to one-year year losses, institutional owners may take drastic measures

Key Insights

• Institutions' substantial holdings in Localiza Rent a Car implies that they have significant influence over the company's share price
• A total of 25 investors have a majority stake in the company with 48% ownership
• Insider ownership in Localiza Rent a Car is 19%

A look at the shareholders of Localiza Rent a Car S.A. (BVMF:RENT3) can tell us which group is most powerful. We can see that institutions own the lion's share in the company with 44% 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$3.0b. Needless to say, the recent loss which further adds to the one-year loss to shareholders of 47% might not go down well especially with this category of shareholders. Also referred to as "smart money", institutions have a lot of sway over how a stock's price moves. Hence, if weakness in Localiza Rent a Car's share price continues, institutional investors may feel compelled to sell the stock, which might not be ideal for individual investors.

Let's take a closer look to see what the different types of shareholders can tell us about Localiza Rent a Car.

See our latest analysis for Localiza Rent a Car

What Does The Institutional Ownership Tell Us About Localiza Rent a Car?

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 Localiza Rent a Car 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. 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 Localiza Rent a Car's historic earnings and revenue below, but keep in mind there's always more to the story.

Localiza Rent a Car is not owned by hedge funds. Looking at our data, we can see that the largest shareholder is FMR LLC with 5.6% of shares outstanding. BlackRock, Inc. is the second largest shareholder owning 4.6% of common stock, and Eugenio Mattar holds about 4.0% of the company stock. Eugenio Mattar, who is the third-largest shareholder, also happens to hold the title of Chairman of the Board.

Our studies suggest that the top 25 shareholders collectively control less than half of the company's shares, meaning that the company's shares are widely disseminated and there is no dominant shareholder.

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

Insider Ownership Of Localiza Rent a Car

While the precise definition of an insider can be subjective, almost everyone considers board members to be insiders. 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.

It seems insiders own a significant proportion of Localiza Rent a Car S.A.. It is very interesting to see that insiders have a meaningful R$5.8b stake in this R$30b business. It is good to see this level of investment. You can check here to see if those insiders have been buying recently.

General Public Ownership

With a 37% ownership, the general public, mostly comprising of individual investors, have some degree of sway over Localiza Rent a Car. 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.

Next Steps:

It's always worth thinking about the different groups who own shares in a company. But to understand Localiza Rent a Car 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 Localiza Rent a Car , 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.

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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.