With 77% ownership of the shares, Smith & Nephew plc (LON:SN.) is heavily dominated by institutional owners

Key Insights

• Significantly high institutional ownership implies Smith & Nephew's stock price is sensitive to their trading actions
• A total of 22 investors have a majority stake in the company with 51% ownership
• Insiders have bought recently

Every investor in Smith & Nephew plc (LON:SN.) should be aware of the most powerful shareholder groups. And the group that holds the biggest piece of the pie are institutions with 77% ownership. Put another way, the group faces the maximum upside potential (or downside risk).

Given the vast amount of money and research capacities at their disposal, institutional ownership tends to carry a lot of weight, especially with individual investors. As a result, a sizeable amount of institutional money invested in a firm is generally viewed as a positive attribute.

In the chart below, we zoom in on the different ownership groups of Smith & Nephew.

View our latest analysis for Smith & Nephew

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

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.

Smith & Nephew already has institutions on the share registry. Indeed, they own a respectable stake in the company. This implies the analysts working for those institutions have looked at the stock and they like it. But just like anyone else, they could be wrong. 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 Smith & Nephew's historic earnings and revenue below, but keep in mind there's always more to the story.

Institutional investors own over 50% of the company, so together than can probably strongly influence board decisions. It would appear that 5.1% of Smith & Nephew shares are controlled by hedge funds. That's interesting, because hedge funds can be quite active and activist. Many look for medium term catalysts that will drive the share price higher. BlackRock, Inc. is currently the largest shareholder, with 6.5% of shares outstanding. In comparison, the second and third largest shareholders hold about 5.1% and 4.7% of the stock.

After doing some more digging, we found that the top 22 have the combined ownership of 51% in the company, suggesting that no single shareholder has significant control over the company.

Researching institutional ownership is a good way to gauge and filter a stock's expected performance. The same can be achieved by studying analyst sentiments. Quite a few analysts cover the stock, so you could look into forecast growth quite easily.

Insider Ownership Of Smith & Nephew

While the precise definition of an insider can be subjective, almost everyone considers board members to be insiders. 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.

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 data suggests that insiders own under 1% of Smith & Nephew plc in their own names. Being so large, we would not expect insiders to own a large proportion of the stock. Collectively, they own UK£10m of stock. It is good to see board members owning shares, but it might be worth checking if those insiders have been buying.

General Public Ownership

With a 17% ownership, the general public, mostly comprising of individual investors, have some degree of sway over Smith & Nephew. 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:

It's always worth thinking about the different groups who own shares in a company. But to understand Smith & Nephew better, we need to consider many other factors. Like risks, for instance. Every company has them, and we've spotted 3 warning signs for Smith & Nephew (of which 1 is a bit concerning!) 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.