Institutional owners may take dramatic actions as Centamin plc's (LON:CEY) recent 5.0% drop adds to one-year losses

Key Insights

• Institutions' substantial holdings in Centamin implies that they have significant influence over the company's share price
• 52% of the business is held by the top 11 shareholders
• Ownership research along with analyst forecasts data help provide a good understanding of opportunities in a stock

Every investor in Centamin plc (LON:CEY) should be aware of the most powerful shareholder groups. The group holding the most number of shares in the company, around 68% to be precise, is institutions. Put another way, the group faces the maximum upside potential (or downside risk).

And institutional investors endured the highest losses after the company's share price fell by 5.0% last week. The recent loss, which adds to a one-year loss of 8.7% for stockholders, may not sit well with this group of investors. Also referred to as "smart money", institutions have a lot of sway over how a stock's price moves. Hence, if weakness in Centamin's share price continues, institutional investors may feel compelled to sell the stock, which might not be ideal for individual investors.

In the chart below, we zoom in on the different ownership groups of Centamin.

Check out our latest analysis for Centamin

What Does The Institutional Ownership Tell Us About Centamin?

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.

We can see that Centamin does have institutional investors; and they hold a good portion of the company's stock. 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 Centamin'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. Hedge funds don't have many shares in Centamin. Van Eck Associates Corporation is currently the company's largest shareholder with 10% of shares outstanding. Meanwhile, the second and third largest shareholders, hold 5.2% and 5.0%, of the shares outstanding, respectively.

Looking at the shareholder registry, we can see that 52% of the ownership is controlled by the top 11 shareholders, meaning that no single shareholder has a majority interest in the ownership.

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 Centamin

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

Insider ownership is positive when it signals leadership are thinking like the true owners of the company. However, high insider ownership can also give immense power to a small group within the company. This can be negative in some circumstances.

Our most recent data indicates that insiders own less than 1% of Centamin plc. Keep in mind that it's a big company, and the insiders own UK£8.9m worth of shares. The absolute value might be more important than the proportional share. 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 32% ownership, the general public, mostly comprising of individual investors, have some degree of sway over Centamin. 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. Consider risks, for instance. Every company has them, and we've spotted 2 warning signs for Centamin you should know about.

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.