Severn Trent Plc (LON:SVT) is favoured by institutional owners who hold 84% of the company

By
Simply Wall St
Published
April 11, 2022
LSE:SVT
Source: Shutterstock

If you want to know who really controls Severn Trent Plc (LON:SVT), then you'll have to look at the makeup of its share registry. The group holding the most number of shares in the company, around 84% to be precise, is institutions. In other words, the group stands to gain the most (or lose the most) from their investment into the company.

Because institutional owners have a huge pool of resources and liquidity, their investing decisions tend to carry a great deal of weight, especially with individual investors. Hence, having a considerable amount of institutional money invested in a company is often regarded as a desirable trait.

Let's take a closer look to see what the different types of shareholders can tell us about Severn Trent.

View our latest analysis for Severn Trent

ownership-breakdown
LSE:SVT Ownership Breakdown April 11th 2022

What Does The Institutional Ownership Tell Us About Severn Trent?

Institutions typically measure themselves against a benchmark when reporting to their own investors, so they often become more enthusiastic about a stock once it's included in a major index. We would expect most companies to have some institutions on the register, especially if they are growing.

Severn Trent already has institutions on the share registry. Indeed, they own a respectable stake in the company. 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 Severn Trent's historic earnings and revenue below, but keep in mind there's always more to the story.

earnings-and-revenue-growth
LSE:SVT Earnings and Revenue Growth April 11th 2022

Investors should note that institutions actually own more than half the company, so they can collectively wield significant power. Severn Trent is not owned by hedge funds. BlackRock, Inc. is currently the company's largest shareholder with 8.5% of shares outstanding. With 6.3% and 4.6% of the shares outstanding respectively, Lazard Asset Management LLC and Qatar Holding LLC are the second and third largest shareholders.

Looking at the shareholder registry, we can see that 51% of the ownership is controlled by the top 16 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. There are plenty of analysts covering the stock, so it might be worth seeing what they are forecasting, too.

Insider Ownership Of Severn Trent

The definition of company insiders can be subjective and does vary between jurisdictions. Our data reflects individual insiders, capturing board members at the very least. Company management run the business, but the CEO will answer to the board, even if he or she is a member of it.

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 Severn Trent Plc. It is a very large company, so it would be surprising to see insiders own a large proportion of the company. Though their holding amounts to less than 1%, we can see that board members collectively own UK£15m worth of shares (at current prices). 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-- including retail investors -- own 15% stake in the company, and hence can't easily be ignored. 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. Consider for instance, the ever-present spectre of investment risk. We've identified 3 warning signs with Severn Trent (at least 2 which are a bit concerning) , 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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