Smith & Nephew plc's (LON:SN.) UK£354m market value fall may be overlooked by institutional investors after a year of 8.5% returns

Key Insights

• Significantly high institutional ownership implies Smith & Nephew's stock price is sensitive to their trading actions
• 50% of the business is held by the top 21 shareholders
• Analyst forecasts along with ownership data serve to give a strong idea about prospects for a business

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To get a sense of who is truly in control of Smith & Nephew plc (LON:SN.), it is important to understand the ownership structure of the business. The group holding the most number of shares in the company, around 81% to be precise, is institutions. Put another way, the group faces the maximum upside potential (or downside risk).

Institutional investors was the group most impacted after the company's market cap fell to UK£9.0b last week. However, the 8.5% one-year return to shareholders might have softened the blow. We would assume however, that they would be on the lookout for weakness in the future.

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

Check out our latest analysis for Smith & Nephew

What Does The Institutional Ownership Tell Us About Smith & Nephew?

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.

We can see that Smith & Nephew does have institutional investors; and they hold a good portion of the company's stock. 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 Smith & Nephew's earnings history below. Of course, the future is what really matters.

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 Smith & Nephew. Our data shows that Cevian Capital AB is the largest shareholder with 7.5% of shares outstanding. With 6.1% and 4.8% of the shares outstanding respectively, BlackRock, Inc. and The Vanguard Group, Inc. are the second and third largest shareholders.

After doing some more digging, we found that the top 21 have the combined ownership of 50% 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 Smith & Nephew

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. 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.

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 Smith & Nephew plc. 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£12m worth of shares (at current prices). 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 18% 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:

While it is well worth considering the different groups that own a company, there are other factors that are even more important. Be aware that Smith & Nephew is showing 2 warning signs in our investment analysis , you should know about...

If you would prefer discover what analysts are predicting in terms of future growth, do not miss this free report on analyst forecasts .

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.