Richelieu Hardware Ltd.'s (TSE:RCH) market cap dropped CA$87m last week; individual investors who hold 46% were hit as were institutions

Key Insights

• Richelieu Hardware's significant individual investors ownership suggests that the key decisions are influenced by shareholders from the larger public
• A total of 25 investors have a majority stake in the company with 50% ownership
• Insiders have been buying lately

Every investor in Richelieu Hardware Ltd. (TSE:RCH) should be aware of the most powerful shareholder groups. The group holding the most number of shares in the company, around 46% to be precise, is individual investors. That is, the group stands to benefit the most if the stock rises (or lose the most if there is a downturn).

While institutions, who own 46% shares weren’t spared from last week’s CA$87m market cap drop, individual investors as a group suffered the maximum losses

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

See our latest analysis for Richelieu Hardware

What Does The Institutional Ownership Tell Us About Richelieu Hardware?

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.

As you can see, institutional investors have a fair amount of stake in Richelieu Hardware. 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. 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 Richelieu Hardware, (below). Of course, keep in mind that there are other factors to consider, too.

We note that hedge funds don't have a meaningful investment in Richelieu Hardware. FMR LLC is currently the company's largest shareholder with 10% of shares outstanding. With 7.6% and 6.6% of the shares outstanding respectively, Richard Lord and Caisse de dépôt et placement du Québec are the second and third largest shareholders. Richard Lord, who is the second-largest shareholder, also happens to hold the title of Chief Executive Officer.

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 is a little analyst coverage of the stock, but not much. So there is room for it to gain more coverage.

Insider Ownership Of Richelieu Hardware

The definition of an insider can differ slightly between different countries, but members of the board of directors always count. 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.

Most consider insider ownership a positive because it can indicate the board is well aligned with other shareholders. However, on some occasions too much power is concentrated within this group.

We can see that insiders own shares in Richelieu Hardware Ltd.. This is a big company, so it is good to see this level of alignment. Insiders own CA$174m worth of shares (at current prices). Most would say this shows alignment of interests between shareholders and the board. Still, it might be worth checking if those insiders have been selling.

General Public Ownership

The general public-- including retail investors -- own 46% 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.

Next Steps:

It's always worth thinking about the different groups who own shares in a company. But to understand Richelieu Hardware better, we need to consider many other factors. For example, we've discovered 1 warning sign for Richelieu Hardware that you should be aware of before investing here.

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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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.

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