Great week for Parex Resources Inc. (TSE:PXT) institutional investors after losing 37% over the previous year

Key Insights

• Institutions' substantial holdings in Parex Resources implies that they have significant influence over the company's share price
• 49% of the business is held by the top 25 shareholders
• Insiders have bought recently

To get a sense of who is truly in control of Parex Resources Inc. (TSE:PXT), it is important to understand the ownership structure of the business. With 55% stake, institutions possess the maximum shares in the company. Put another way, the group faces the maximum upside potential (or downside risk).

After a year of 37% losses, last week’s 10% gain would be welcomed by institutional investors as a possible sign that returns might start trending higher.

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

View our latest analysis for Parex Resources

What Does The Institutional Ownership Tell Us About Parex Resources?

Institutions typically measure themselves against a benchmark when reporting to their own investors, so they often become more enthusiastic about a stock once it's included in a major index. We would expect most companies to have some institutions on the register, especially if they are growing.

We can see that Parex Resources 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. 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 Parex Resources, (below). Of course, keep in mind that there are other factors to consider, too.

Investors should note that institutions actually own more than half the company, so they can collectively wield significant power. We note that hedge funds don't have a meaningful investment in Parex Resources. Looking at our data, we can see that the largest shareholder is Mawer Investment Management Ltd. with 10% of shares outstanding. With 9.4% and 4.3% of the shares outstanding respectively, FMR LLC and Dimensional Fund Advisors LP are the second and third largest shareholders.

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. Quite a few analysts cover the stock, so you could look into forecast growth quite easily.

Insider Ownership Of Parex Resources

While the precise definition of an insider can be subjective, almost everyone considers board members to be insiders. Management ultimately answers to the board. However, it is not uncommon for managers to be executive board members, especially if they are a founder or the CEO.

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.

Shareholders would probably be interested to learn that insiders own shares in Parex Resources Inc.. It has a market capitalization of just CA$1.3b, and insiders have CA$22m worth of shares, in their own names. This shows at least some alignment. You can click here to see if those insiders have been buying or selling.

General Public Ownership

With a 43% ownership, the general public, mostly comprising of individual investors, have some degree of sway over Parex Resources. 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.

Next Steps:

I find it very interesting to look at who exactly owns a company. But to truly gain insight, we need to consider other information, too. Like risks, for instance. Every company has them, and we've spotted 2 warning signs for Parex Resources (of which 1 is a bit concerning!) you should know about.

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.