An excellent week for Grafton Group plc's (LON:GFTU) institutional owners who own 48% as one-year returns inch higher

Key Insights

• Given the large stake in the stock by institutions, Grafton Group's stock price might be vulnerable to their trading decisions
• The top 12 shareholders own 51% of the company
• 11% of Grafton Group is held by insiders

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A look at the shareholders of Grafton Group plc (LON:GFTU) can tell us which group is most powerful. The group holding the most number of shares in the company, around 48% to be precise, is institutions. Put another way, the group faces the maximum upside potential (or downside risk).

Last week’s 9.4% gain means that institutional investors were on the positive end of the spectrum even as the company has shown strong longer-term trends. One-year return to shareholders is currently 3.5% and last week’s gain was the icing on the cake.

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

View our latest analysis for Grafton Group

What Does The Institutional Ownership Tell Us About Grafton Group?

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

It looks like hedge funds own 5.1% of Grafton Group shares. That catches my attention because hedge funds sometimes try to influence management, or bring about changes that will create near term value for shareholders. The company's largest shareholder is Michael Chadwick, with ownership of 11%. In comparison, the second and third largest shareholders hold about 5.8% and 5.4% of the stock.

After doing some more digging, we found that the top 12 have the combined ownership of 51% in the company, suggesting that no single shareholder has significant control over 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. Quite a few analysts cover the stock, so you could look into forecast growth quite easily.

Insider Ownership Of Grafton 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.

It seems insiders own a significant proportion of Grafton Group plc. Insiders own UK£219m worth of shares in the UK£1.9b company. That's quite meaningful. Most would be pleased to see the board is investing alongside them. You may wish to access this free chart showing recent trading by insiders.

General Public Ownership

With a 36% ownership, the general public, mostly comprising of individual investors, have some degree of sway over Grafton Group. While this group can't necessarily call the shots, it can certainly have a real influence on how the company is run.

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.

I like to dive deeper into how a company has performed in the past. You can access this interactive graph of past earnings, revenue and cash flow, for free.

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.

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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.