Are Institutions Heavily Invested In Shaw Communications Inc.'s (TSE:SJR.B) Shares?

By
Simply Wall St
Published
November 17, 2020
TSX:SJR.B
Source: Shutterstock

The big shareholder groups in Shaw Communications Inc. (TSE:SJR.B) have power over the company. Institutions often own shares in more established companies, while it's not unusual to see insiders own a fair bit of smaller companies. Companies that used to be publicly owned tend to have lower insider ownership.

With a market capitalization of CA$12b, Shaw Communications 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. Taking a look at our data on the ownership groups (below), it seems that institutions are noticeable on the share registry. Let's delve deeper into each type of owner, to discover more about Shaw Communications.

View our latest analysis for Shaw Communications

ownership-breakdown
TSX:SJR.B Ownership Breakdown November 17th 2020

What Does The Institutional Ownership Tell Us About Shaw Communications?

Many institutions measure their performance against an index that approximates the local market. So they usually pay more attention to companies that are included in major indices.

Shaw Communications 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 Shaw Communications' historic earnings and revenue below, but keep in mind there's always more to the story.

earnings-and-revenue-growth
TSX:SJR.B Earnings and Revenue Growth November 17th 2020

Since institutional investors own more than half the issued stock, the board will likely have to pay attention to their preferences. Hedge funds don't have many shares in Shaw Communications. The company's largest shareholder is RBC Global Asset Management Inc., with ownership of 6.2%. For context, the second largest shareholder holds about 4.1% of the shares outstanding, followed by an ownership of 3.5% by the third-largest shareholder. In addition, we found that Bradley Shaw, the CEO has 1.4% of the shares allocated to his name

A deeper look at our ownership data shows that the top 25 shareholders collectively hold less than half of the register, suggesting a large group of small holders where no single shareholder has a majority.

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

Insider Ownership Of Shaw Communications

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.

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.

I can report that insiders do own shares in Shaw Communications Inc.. The insiders have a meaningful stake worth CA$479m. Most would say this shows a good 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 holds a 33% stake in Shaw Communications. 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:

While it is well worth considering the different groups that own a company, there are other factors that are even more important. Case in point: We've spotted 2 warning signs for Shaw Communications you should be aware of.

If you are like me, you may want to think about whether this company will grow or shrink. Luckily, you can check this free report showing analyst forecasts for its 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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