Stock Analysis

Institutional owners may take dramatic actions as Watkin Jones Plc's (LON:WJG) recent 12% drop adds to one-year losses

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AIM:WJG
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To get a sense of who is truly in control of Watkin Jones Plc (LON:WJG), it is important to understand the ownership structure of the business. And the group that holds the biggest piece of the pie are institutions with 68% ownership. Put another way, the group faces the maximum upside potential (or downside risk).

As a result, institutional investors endured the highest losses last week after market cap fell by UK£31m. The recent loss, which adds to a one-year loss of 61% 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 Watkin Jones' 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 Watkin Jones.

Check out the opportunities and risks within the GB Real Estate industry.

ownership-breakdown
AIM:WJG Ownership Breakdown December 6th 2022

What Does The Institutional Ownership Tell Us About Watkin Jones?

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.

As you can see, institutional investors have a fair amount of stake in Watkin Jones. 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. 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 Watkin Jones' earnings history below. Of course, the future is what really matters.

earnings-and-revenue-growth
AIM:WJG Earnings and Revenue Growth December 6th 2022

Investors should note that institutions actually own more than half the company, so they can collectively wield significant power. Hedge funds don't have many shares in Watkin Jones. The company's largest shareholder is Octopus Investments Limited, with ownership of 12%. In comparison, the second and third largest shareholders hold about 7.0% and 5.5% of the stock.

Looking at the shareholder registry, we can see that 52% of the ownership is controlled by the top 12 shareholders, meaning that no single shareholder has a majority interest in the ownership.

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 Watkin Jones

The definition of an insider can differ slightly between different countries, but members of the board of directors always count. 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 Watkin Jones Plc. We do note, however, it is possible insiders have an indirect interest through a private company or other corporate structure. It has a market capitalization of just UK£237m, and the board has only UK£749k worth of shares in their own names. Many investors in smaller companies prefer to see the board more heavily invested. You can click here to see if those insiders have been buying or selling.

General Public Ownership

The general public, who are usually individual investors, hold a 11% stake in Watkin Jones. 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.

Private Equity Ownership

With an ownership of 12%, private equity firms are in a position to play a role in shaping corporate strategy with a focus on value creation. Some investors might be encouraged by this, since private equity are sometimes able to encourage strategies that help the market see the value in the company. Alternatively, those holders might be exiting the investment after taking it public.

Private Company Ownership

Our data indicates that Private Companies hold 6.3%, of the company's shares. It might be worth looking deeper into this. If related parties, such as insiders, have an interest in one of these private companies, that should be disclosed in the annual report. Private companies may also have a strategic interest in the company.

Next Steps:

I find it very interesting to look at who exactly owns a company. But to truly gain insight, we need to consider other information, too. For example, we've discovered 4 warning signs for Watkin Jones (1 shouldn't be ignored!) that you should be aware of before investing here.

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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