Is Linamar Corporation (TSE:LNR) Popular Amongst Insiders?

By
Simply Wall St
Published
September 02, 2021
TSX:LNR
Source: Shutterstock

The big shareholder groups in Linamar Corporation (TSE:LNR) have power over the company. Institutions will often hold stock in bigger companies, and we expect to see insiders owning a noticeable percentage of the smaller ones. I generally like to see some degree of insider ownership, even if only a little. As Nassim Nicholas Taleb said, 'Don’t tell me what you think, tell me what you have in your portfolio.

With a market capitalization of CA$4.7b, Linamar is rather large. We'd expect to see institutional investors on the register. Companies of this size are usually well known to retail investors, too. Our analysis of the ownership of the company, below, shows that institutions own shares in the company. We can zoom in on the different ownership groups, to learn more about Linamar.

See our latest analysis for Linamar

ownership-breakdown
TSX:LNR Ownership Breakdown September 3rd 2021

What Does The Institutional Ownership Tell Us About Linamar?

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.

Linamar already has institutions on the share registry. Indeed, they own a respectable stake in the company. 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 Linamar's historic earnings and revenue below, but keep in mind there's always more to the story.

earnings-and-revenue-growth
TSX:LNR Earnings and Revenue Growth September 3rd 2021

Linamar is not owned by hedge funds. From our data, we infer that the largest shareholder is Frank Hasenfratz (who also holds the title of Top Key Executive) with 24% of shares outstanding. Its usually considered a good sign when insiders own a significant number of shares in the company, and in this case, we're glad to see a company insider play the role of a key stakeholder. With 11% and 9.6% of the shares outstanding respectively, FMR LLC and Letko, Brosseau & Associates Inc. are the second and third largest shareholders. In addition, we found that Linda Hasenfratz, the CEO has 7.0% of the shares allocated to their name.

Our research also brought to light the fact that roughly 51% of the company is controlled by the top 4 shareholders suggesting that these owners wield significant influence on the business.

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 Linamar

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.

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 Linamar Corporation. It has a market capitalization of just CA$4.7b, and insiders have CA$1.5b worth of shares in their own names. That's quite significant. 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

The general public holds a 29% stake in Linamar. While this group can't necessarily call the shots, it can certainly have a real influence on how the company is run.

Next Steps:

It's always worth thinking about the different groups who own shares in a company. But to understand Linamar better, we need to consider many other factors. Case in point: We've spotted 2 warning signs for Linamar you should be aware of, and 1 of them can't be ignored.

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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