Institutional investors may adopt severe steps after Ashtead Group plc's (LON:AHT) latest 3.5% drop adds to a year losses

Key Insights

• Significantly high institutional ownership implies Ashtead Group's stock price is sensitive to their trading actions
• 51% of the business is held by the top 20 shareholders
• Analyst forecasts along with ownership data serve to give a strong idea about prospects for a business

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Every investor in Ashtead Group plc (LON:AHT) should be aware of the most powerful shareholder groups. The group holding the most number of shares in the company, around 87% to be precise, is institutions. In other words, the group stands to gain the most (or lose the most) from their investment into the company.

As a result, institutional investors endured the highest losses last week after market cap fell by UK£817m. Needless to say, the recent loss which further adds to the one-year loss to shareholders of 11% might not go down well especially with this category of shareholders. Often called “market movers", institutions wield significant power in influencing the price dynamics of any stock. As a result, if the decline continues, institutional investors may be pressured to sell Ashtead Group which might hurt individual investors.

Let's delve deeper into each type of owner of Ashtead Group, beginning with the chart below.

Check out our latest analysis for Ashtead Group

What Does The Institutional Ownership Tell Us About Ashtead 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.

Ashtead Group 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 Ashtead Group's historic earnings and revenue below, but keep in mind there's always more to the story.

Since institutional investors own more than half the issued stock, the board will likely have to pay attention to their preferences. Ashtead Group is not owned by hedge funds. The company's largest shareholder is Dodge & Cox, with ownership of 11%. In comparison, the second and third largest shareholders hold about 7.3% and 5.2% of the stock.

A closer look at our ownership figures suggests that the top 20 shareholders have a combined ownership of 51% implying that no single shareholder has a majority.

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 Ashtead Group

While the precise definition of an insider can be subjective, almost everyone considers board members to be insiders. Management ultimately answers to the board. However, it is not uncommon for managers to be executive board members, especially if they are a founder or the CEO.

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 information suggests that Ashtead Group plc insiders own under 1% of the company. As it is a large company, we'd only expect insiders to own a small percentage of it. But it's worth noting that they own UK£23m 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 12% stake in the company, and hence can't easily be ignored. While this size of ownership may not be enough to sway a policy decision in their favour, they can still make a collective impact on company policies.

Next Steps:

It's always worth thinking about the different groups who own shares in a company. But to understand Ashtead Group better, we need to consider many other factors. Be aware that Ashtead Group 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.