Tesco PLC's (LON:TSCO) high institutional ownership speaks for itself as stock continues to impress, up 3.5% over last week

Key Insights

• Institutions' substantial holdings in Tesco implies that they have significant influence over the company's share price
• 51% of the business is held by the top 24 shareholders
• Analyst forecasts along with ownership data serve to give a strong idea about prospects for a business

Every investor in Tesco PLC (LON:TSCO) should be aware of the most powerful shareholder groups. We can see that institutions own the lion's share in the company with 78% ownership. In other words, the group stands to gain the most (or lose the most) from their investment into the company.

And as as result, institutional investors reaped the most rewards after the company's stock price gained 3.5% last week. One-year return to shareholders is currently 15% and last week’s gain was the icing on the cake.

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

Check out our latest analysis for Tesco

What Does The Institutional Ownership Tell Us About Tesco?

Many institutions measure their performance against an index that approximates the local market. So they usually pay more attention to companies that are included in major indices.

As you can see, institutional investors have a fair amount of stake in Tesco. This suggests some credibility amongst professional investors. But we can't rely on that fact alone since institutions make bad investments sometimes, just like everyone does. 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 Tesco'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. We note that hedge funds don't have a meaningful investment in Tesco. Looking at our data, we can see that the largest shareholder is BlackRock, Inc. with 8.2% of shares outstanding. Meanwhile, the second and third largest shareholders, hold 4.8% and 3.9%, of the shares outstanding, respectively.

After doing some more digging, we found that the top 24 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 Tesco

The definition of company insiders can be subjective and does vary between jurisdictions. Our data reflects individual insiders, capturing board members at the very least. Company management run the business, but the CEO will answer to the board, even if he or she is a member of it.

Most consider insider ownership a positive because it can indicate the board is well aligned with other shareholders. However, on some occasions too much power is concentrated within this group.

Our most recent data indicates that insiders own less than 1% of Tesco PLC. Being so large, we would not expect insiders to own a large proportion of the stock. Collectively, they own UK£18m of stock. 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 18% stake in Tesco. 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 Tesco better, we need to consider many other factors. Be aware that Tesco 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.