Is Micro Focus International plc (LON:MCRO) Popular Amongst Institutions?

The big shareholder groups in Micro Focus International plc (LON:MCRO) have power over the company. Institutions will often hold stock in bigger companies, and we expect to see insiders owning a noticeable percentage of the smaller ones. We also tend to see lower insider ownership in companies that were previously publicly owned.

Micro Focus International has a market capitalization of UK£1.6b, so we would expect some institutional investors to have noticed the stock. Taking a look at our data on the ownership groups (below), it seems that institutions own shares in the company. Let's delve deeper into each type of owner, to discover more about Micro Focus International.

View our latest analysis for Micro Focus International

What Does The Institutional Ownership Tell Us About Micro Focus International?

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 Micro Focus International does have institutional investors; and they hold a good portion of the company's stock. 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. 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 Micro Focus International'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. Hedge funds don't have many shares in Micro Focus International. Dodge & Cox is currently the company's largest shareholder with 17% of shares outstanding. Meanwhile, the second and third largest shareholders, hold 7.2% and 5.0%, of the shares outstanding, respectively.

Looking at the shareholder registry, we can see that 51% of the ownership is controlled by the top 13 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. There are a reasonable number of analysts covering the stock, so it might be useful to find out their aggregate view on the future.

Insider Ownership Of Micro Focus International

The definition of an insider can differ slightly between different countries, but members of the board of directors always count. 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 Micro Focus International plc. Keep in mind that it's a big company, and the insiders own UK£4.3m 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

The general public holds a 23% stake in Micro Focus International. 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 Micro Focus International better, we need to consider many other factors. Consider for instance, the ever-present spectre of investment risk. We've identified 1 warning sign with Micro Focus International , and understanding them should be part of your investment process.

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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