Rolls-Royce Holdings plc's (LON:RR.) high institutional ownership speaks for itself as stock continues to impress, up 6.1% over last week

Key Insights

• Significantly high institutional ownership implies Rolls-Royce Holdings' stock price is sensitive to their trading actions
• A total of 24 investors have a majority stake in the company with 50% ownership
• Recent purchases by insiders

To get a sense of who is truly in control of Rolls-Royce Holdings plc (LON:RR.), it is important to understand the ownership structure of the business. The group holding the most number of shares in the company, around 76% to be precise, is institutions. That is, the group stands to benefit the most if the stock rises (or lose the most if there is a downturn).

Last week’s 6.1% 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 150% and last week’s gain was the icing on the cake.

In the chart below, we zoom in on the different ownership groups of Rolls-Royce Holdings.

View our latest analysis for Rolls-Royce Holdings

What Does The Institutional Ownership Tell Us About Rolls-Royce Holdings?

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.

As you can see, institutional investors have a fair amount of stake in Rolls-Royce Holdings. 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 Rolls-Royce Holdings, (below). Of course, keep in mind that there are other factors to consider, too.

Institutional investors own over 50% of the company, so together than can probably strongly influence board decisions. Rolls-Royce Holdings is not owned by hedge funds. Looking at our data, we can see that the largest shareholder is BlackRock, Inc. with 5.1% of shares outstanding. With 5.0% and 4.4% of the shares outstanding respectively, Causeway Capital Management LLC and The Vanguard Group, Inc. are the second and third largest shareholders.

Looking at the shareholder registry, we can see that 50% of the ownership is controlled by the top 24 shareholders, meaning that no single shareholder has a majority interest in the ownership.

While it makes sense to study institutional ownership data for a company, it also makes sense to study analyst sentiments to know which way the wind is blowing. Quite a few analysts cover the stock, so you could look into forecast growth quite easily.

Insider Ownership Of Rolls-Royce Holdings

The definition of an insider can differ slightly between different countries, but members of the board of directors always count. 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 data suggests that insiders own under 1% of Rolls-Royce Holdings plc in their own names. It is a very large company, so it would be surprising to see insiders own a large proportion of the company. Though their holding amounts to less than 1%, we can see that board members collectively own UK£3.5m worth of shares (at current prices). It is always good to see at least some insider ownership, but it might be worth checking if those insiders have been selling.

General Public Ownership

The general public, who are usually individual investors, hold a 21% stake in Rolls-Royce Holdings. 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:

While it is well worth considering the different groups that own a company, there are other factors that are even more important. To that end, you should learn about the 3 warning signs we've spotted with Rolls-Royce Holdings (including 2 which shouldn't be ignored) .

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.