Institutional investors have a lot riding on Volex plc (LON:VLX) with 58% ownership

Key Insights

• Given the large stake in the stock by institutions, Volex's stock price might be vulnerable to their trading decisions
• 50% of the business is held by the top 9 shareholders
• Insider ownership in Volex is 27%

To get a sense of who is truly in control of Volex plc (LON:VLX), it is important to understand the ownership structure of the business. With 58% stake, institutions possess the maximum shares in the company. That is, the group stands to benefit the most if the stock rises (or lose the most if there is a downturn).

And last week, institutional investors ended up benefitting the most after the company hit UK£662m in market cap. One-year return to shareholders is currently 17% and last week’s gain was the icing on the cake.

In the chart below, we zoom in on the different ownership groups of Volex.

See our latest analysis for Volex

What Does The Institutional Ownership Tell Us About Volex?

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.

As you can see, institutional investors have a fair amount of stake in Volex. 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. 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 Volex, (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. Hedge funds don't have many shares in Volex. Because actions speak louder than words, we consider it a good sign when insiders own a significant stake in a company. In Volex's case, its Top Key Executive, Nathaniel Philip Victor Rothschild, is the largest shareholder, holding 26% of shares outstanding. Meanwhile, the second and third largest shareholders, hold 6.0% and 3.4%, of the shares outstanding, respectively.

We also observed that the top 9 shareholders account for more than half of the share register, with a few smaller shareholders to balance the interests of the larger ones to a certain extent.

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

Insider Ownership Of Volex

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.

It seems insiders own a significant proportion of Volex plc. Insiders have a UK£180m stake in this UK£662m business. It is great to see insiders so invested in the business. It might be worth checking if those insiders have been buying recently.

General Public Ownership

The general public-- including retail investors -- own 13% stake in the company, and hence can't easily be ignored. 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:

I find it very interesting to look at who exactly owns a company. But to truly gain insight, we need to consider other information, too. Be aware that Volex is showing 1 warning sign in our investment analysis , you should know about...

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. 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.