Stock Analysis

After a year of 4.0% returns, Scandinavian Tobacco Group A/S' (CPH:STG) share price drop last week may have less of an impact on institutional investors

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CPSE:STG
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Key Insights

  • Institutions' substantial holdings in Scandinavian Tobacco Group implies that they have significant influence over the company's share price
  • 51% of the business is held by the top 3 shareholders
  • Ownership research along with analyst forecasts data help provide a good understanding of opportunities in a stock

Every investor in Scandinavian Tobacco Group A/S (CPH:STG) should be aware of the most powerful shareholder groups. And the group that holds the biggest piece of the pie are institutions with 38% ownership. Put another way, the group faces the maximum upside potential (or downside risk).

Losing money on investments is something no shareholder enjoys, least of all institutional investors who saw their holdings value drop by 4.2% last week. Still, the 4.0% one-year gains may have helped mitigate their overall losses. But they would probably be wary of future losses.

In the chart below, we zoom in on the different ownership groups of Scandinavian Tobacco Group.

Check out our latest analysis for Scandinavian Tobacco Group

ownership-breakdown
CPSE:STG Ownership Breakdown December 11th 2023

What Does The Institutional Ownership Tell Us About Scandinavian Tobacco Group?

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.

Scandinavian Tobacco Group already has institutions on the share registry. Indeed, they own a respectable stake in the company. 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 Scandinavian Tobacco Group, (below). Of course, keep in mind that there are other factors to consider, too.

earnings-and-revenue-growth
CPSE:STG Earnings and Revenue Growth December 11th 2023

Our data indicates that hedge funds own 11% of Scandinavian Tobacco Group. That catches my attention because hedge funds sometimes try to influence management, or bring about changes that will create near term value for shareholders. Chr. Augustinus Fabrikker Aktieselskab is currently the largest shareholder, with 27% of shares outstanding. Meanwhile, the second and third largest shareholders, hold 12% and 11%, of the shares outstanding, respectively.

After doing some more digging, we found that the top 3 shareholders collectively control more than half of the company's shares, implying that they have considerable power to influence the company's decisions.

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

Insider Ownership Of Scandinavian Tobacco Group

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.

Insider ownership is positive when it signals leadership are thinking like the true owners of the company. However, high insider ownership can also give immense power to a small group within the company. This can be negative in some circumstances.

Our information suggests that Scandinavian Tobacco Group A/S insiders own under 1% of the company. But they may have an indirect interest through a corporate structure that we haven't picked up on. 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.74m 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-- including retail investors -- own 23% 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.

Private Company Ownership

We can see that Private Companies own 27%, of the shares on issue. Private companies may be related parties. Sometimes insiders have an interest in a public company through a holding in a private company, rather than in their own capacity as an individual. While it's hard to draw any broad stroke conclusions, it is worth noting as an area for further research.

Next Steps:

While it is well worth considering the different groups that own a company, there are other factors that are even more important. For instance, we've identified 2 warning signs for Scandinavian Tobacco Group that you should be aware of.

But ultimately it is the future, not the past, that will determine how well the owners of this business will do. Therefore we think it advisable to take a look at this free report showing whether analysts are predicting a brighter 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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