Positive week for LANXESS Aktiengesellschaft (ETR:LXS) institutional investors who lost 2.0% over the past year

Key Insights

• Significantly high institutional ownership implies LANXESS' stock price is sensitive to their trading actions
• A total of 12 investors have a majority stake in the company with 50% ownership
• Using data from analyst forecasts alongside ownership research, one can better assess the future performance of a company

Every investor in LANXESS Aktiengesellschaft (ETR:LXS) should be aware of the most powerful shareholder groups. With 59% stake, institutions possess the maximum shares in the company. In other words, the group stands to gain the most (or lose the most) from their investment into the company.

Last week's €126m market cap gain would probably be appreciated by institutional investors, especially after a year of 2.0% losses.

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

Check out our latest analysis for LANXESS

What Does The Institutional Ownership Tell Us About LANXESS?

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.

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

Investors should note that institutions actually own more than half the company, so they can collectively wield significant power. It looks like hedge funds own 5.3% of LANXESS shares. That's interesting, because hedge funds can be quite active and activist. Many look for medium term catalysts that will drive the share price higher. Looking at our data, we can see that the largest shareholder is Merrill Lynch & Co. Inc., Banking Investments with 6.0% of shares outstanding. The second and third largest shareholders are Scott Ferguson and Sachem Head Capital Management LP, with an equal amount of shares to their name at 5.3%.

After doing some more digging, we found that the top 12 have the combined ownership of 50% in the company, suggesting that no single shareholder has significant control over the company.

Researching institutional ownership is a good way to gauge and filter a stock's expected performance. The same can be achieved by studying analyst sentiments. There are a reasonable number of analysts covering the stock, so it might be useful to find out their aggregate view on the future.

Insider Ownership Of LANXESS

The definition of an insider can differ slightly between different countries, but members of the board of directors always count. Company management run the business, but the CEO will answer to the board, even if he or she is a member of it.

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.

Our most recent data indicates that insiders own some shares in LANXESS Aktiengesellschaft. The insiders have a meaningful stake worth €177m. Most would see this as a real positive. If you would like to explore the question of insider alignment, you can click here to see if insiders have been buying or selling.

General Public Ownership

The general public-- including retail investors -- own 26% stake in the company, and hence can't easily be ignored. While this group can't necessarily call the shots, it can certainly have a real influence on how the company is run.

Next Steps:

While it is well worth considering the different groups that own a company, there are other factors that are even more important. Consider for instance, the ever-present spectre of investment risk. We've identified 1 warning sign with LANXESS , and understanding them should be part of your investment process.

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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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.