Is ENCE Energía y Celulosa, S.A. (BME:ENC) Popular Amongst Insiders?

By
Simply Wall St
Published
July 07, 2021
BME:ENC
Source: Shutterstock

A look at the shareholders of ENCE Energía y Celulosa, S.A. (BME:ENC) can tell us which group is most powerful. Institutions will often hold stock in bigger companies, and we expect to see insiders owning a noticeable percentage of the smaller ones. Warren Buffett said that he likes "a business with enduring competitive advantages that is run by able and owner-oriented people." So it's nice to see some insider ownership, because it may suggest that management is owner-oriented.

ENCE Energía y Celulosa has a market capitalization of €801m, so we would expect some institutional investors to have noticed the stock. In the chart below, we can see that institutional investors have bought into the company. Let's delve deeper into each type of owner, to discover more about ENCE Energía y Celulosa.

See our latest analysis for ENCE Energía y Celulosa

ownership-breakdown
BME:ENC Ownership Breakdown July 8th 2021

What Does The Institutional Ownership Tell Us About ENCE Energía y Celulosa?

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.

ENCE Energía y Celulosa 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. 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 ENCE Energía y Celulosa, (below). Of course, keep in mind that there are other factors to consider, too.

earnings-and-revenue-growth
BME:ENC Earnings and Revenue Growth July 8th 2021

Hedge funds don't have many shares in ENCE Energía y Celulosa. The company's largest shareholder is Retos Operativos XXI, S.L., with ownership of 30%. Meanwhile, the second and third largest shareholders, hold 7.4% and 6.5%, of the shares outstanding, respectively.

On looking further, we found that 50% of the shares are owned by the top 4 shareholders. In other words, these shareholders have a meaningful say in the decisions of the company.

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 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 ENCE Energía y Celulosa

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.

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 ENCE Energía y Celulosa, S.A.. It has a market capitalization of just €801m, and insiders have €58m worth of shares, in their own names. It is good to see some investment by insiders, but it might be worth checking if those insiders have been buying.

General Public Ownership

With a 24% ownership, the general public have some degree of sway over ENCE Energía y Celulosa. 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.

Private Company Ownership

We can see that Private Companies own 50%, 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. Be aware that ENCE Energía y Celulosa is showing 2 warning signs in our investment analysis , and 1 of those is concerning...

Ultimately the future is most important. You can access this free report on analyst forecasts for the company.

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. 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.
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