A fantastic week for National Grid plc's (LON:NG.) 77% institutional owners, one-year returns continue to impress

Key Insights

• Given the large stake in the stock by institutions, National Grid's stock price might be vulnerable to their trading decisions
• 46% of the business is held by the top 25 shareholders
• Ownership research along with analyst forecasts data help provide a good understanding of opportunities in a stock

To get a sense of who is truly in control of National Grid plc (LON:NG.), it is important to understand the ownership structure of the business. With 77% stake, institutions possess the maximum shares in the company. Put another way, the group faces the maximum upside potential (or downside risk).

Last week’s 4.4% gain means that institutional investors were on the positive end of the spectrum even as the company has shown strong longer-term trends. One-year return to shareholders is currently 9.5% and last week’s gain was the icing on the cake.

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

See our latest analysis for National Grid

What Does The Institutional Ownership Tell Us About National Grid?

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 National Grid 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. It is not uncommon to see a big share price drop if two large institutional investors try to sell out of a stock at the same time. So it is worth checking the past earnings trajectory of National Grid, (below). Of course, keep in mind that there are other factors to consider, too.

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 National Grid. BlackRock, Inc. is currently the company's largest shareholder with 9.4% of shares outstanding. For context, the second largest shareholder holds about 5.3% of the shares outstanding, followed by an ownership of 2.4% by the third-largest shareholder.

A deeper look at our ownership data shows that the top 25 shareholders collectively hold less than half of the register, suggesting a large group of small holders where no single shareholder has a majority.

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. 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 National Grid

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 information suggests that National Grid plc insiders own under 1% of the company. As it is a large company, we'd only expect insiders to own a small percentage of it. But it's worth noting that they own UK£27m worth of shares. Arguably recent buying and selling is just as important to consider. You can click here to see if insiders have been buying or selling.

General Public Ownership

The general public, who are usually individual investors, hold a 22% stake in National Grid. While this group can't necessarily call the shots, it can certainly have a real influence on how the company is run.

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 National Grid is showing 4 warning signs in our investment analysis , and 3 of those make us uncomfortable...

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.