Great week for TORM plc (CPH:TRMD A) institutional investors after losing 46% over the previous year

Key Insights

• Given the large stake in the stock by institutions, TORM's stock price might be vulnerable to their trading decisions
• 50% of the business is held by the top 5 shareholders
• Insiders have been selling lately

We've discovered 3 warning signs about TORM. View them for free.

Every investor in TORM plc (CPH:TRMD A) should be aware of the most powerful shareholder groups. With 61% stake, institutions possess the maximum shares in the company. Put another way, the group faces the maximum upside potential (or downside risk).

Last week's kr.997m market cap gain would probably be appreciated by institutional investors, especially after a year of 46% losses.

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

See our latest analysis for TORM

What Does The Institutional Ownership Tell Us About TORM?

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.

We can see that TORM does have institutional investors; and they hold a good portion of the company's stock. This suggests some credibility amongst professional investors. But we can't rely on that fact alone since institutions make bad investments sometimes, just like everyone does. 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 TORM, (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. TORM is not owned by hedge funds. Looking at our data, we can see that the largest shareholder is Brookfield Corporation with 41% of shares outstanding. Meanwhile, the second and third largest shareholders, hold 4.5% and 2.0%, of the shares outstanding, respectively.

On looking further, we found that 50% of the shares are owned by the top 5 shareholders. In other words, these shareholders have a meaningful say in the decisions of 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 TORM

While the precise definition of an insider can be subjective, almost everyone considers board members to be insiders. 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.

Our most recent data indicates that insiders own less than 1% of TORM plc. It's a big company, so even a small proportional interest can create alignment between the board and shareholders. In this case insiders own kr.17m worth of shares. It is good to see board members owning shares, but it might be worth checking if those insiders have been buying.

General Public Ownership

The general public, who are usually individual investors, hold a 39% stake in TORM. 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:

While it is well worth considering the different groups that own a company, there are other factors that are even more important. Be aware that TORM is showing 3 warning signs in our investment analysis , and 2 of those don't sit too well with us...

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.

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

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.