Institutional owners may ignore RELX PLC's (LON:REL) recent UK£1.6b market cap decline as longer-term profits stay in the green

Key Insights

• Given the large stake in the stock by institutions, RELX's stock price might be vulnerable to their trading decisions
• The top 25 shareholders own 43% of the company
• Analyst forecasts along with ownership data serve to give a strong idea about prospects for a business

Every investor in RELX PLC (LON:REL) should be aware of the most powerful shareholder groups. With 71% 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).

Institutional investors was the group most impacted after the company's market cap fell to UK£52b last week. However, the 27% one-year return to shareholders might have softened the blow. But they would probably be wary of future losses.

Let's take a closer look to see what the different types of shareholders can tell us about RELX.

Check out our latest analysis for RELX

What Does The Institutional Ownership Tell Us About RELX?

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.

RELX 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. If multiple institutions change their view on a stock at the same time, you could see the share price drop fast. It's therefore worth looking at RELX's earnings history below. Of course, the future is what really matters.

Institutional investors own over 50% of the company, so together than can probably strongly influence board decisions. We note that hedge funds don't have a meaningful investment in RELX. BlackRock, Inc. is currently the company's largest shareholder with 9.6% of shares outstanding. The Vanguard Group, Inc. is the second largest shareholder owning 4.4% of common stock, and Legal & General Investment Management Limited holds about 1.9% of the company stock.

On studying our ownership data, we found that 25 of the top shareholders collectively own less than 50% of the share register, implying that no single individual has a majority interest.

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 RELX

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 most recent data indicates that insiders own less than 1% of RELX PLC. Being so large, we would not expect insiders to own a large proportion of the stock. Collectively, they own UK£53m of stock. In this sort of situation, it can be more interesting to see if those insiders have been buying or selling.

General Public Ownership

The general public-- including retail investors -- own 28% stake in the company, and hence can't easily be ignored. While this group can't necessarily call the shots, it can certainly have a real influence on how the company is run.

Next Steps:

It's always worth thinking about the different groups who own shares in a company. But to understand RELX better, we need to consider many other factors. To that end, you should be aware of the 1 warning sign we've spotted with RELX .

But ultimately it is the future, not the past, that will determine how well the owners of this business will do. Therefore we think it advisable to take a look at this free report showing whether analysts are predicting a brighter 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.