CARE Ratings Limited's (NSE:CARERATING) large institutional owners must be happy as stock continues to impress, up 22% over the past week

Key Insights

• Given the large stake in the stock by institutions, CARE Ratings' stock price might be vulnerable to their trading decisions
• The top 10 shareholders own 50% of the company
• Using data from company's past performance alongside ownership research, one can better assess the future performance of a company

Our free stock report includes 1 warning sign investors should be aware of before investing in CARE Ratings. Read for free now.

A look at the shareholders of CARE Ratings Limited (NSE:CARERATING) can tell us which group is most powerful. And the group that holds the biggest piece of the pie are institutions with 41% ownership. In other words, the group stands to gain the most (or lose the most) from their investment into the company.

And last week, institutional investors ended up benefitting the most after the company hit ₹45b in market cap. The one-year return on investment is currently 40% and last week's gain would have been more than welcomed.

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

See our latest analysis for CARE Ratings

What Does The Institutional Ownership Tell Us About CARE Ratings?

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.

As you can see, institutional investors have a fair amount of stake in CARE Ratings. 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. 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 CARE Ratings' historic earnings and revenue below, but keep in mind there's always more to the story.

It would appear that 9.5% of CARE Ratings shares are controlled by hedge funds. That worth noting, since hedge funds are often quite active investors, who may try to influence management. Many want to see value creation (and a higher share price) in the short term or medium term. Life Insurance Corporation of India, Asset Management Arm is currently the largest shareholder, with 9.6% of shares outstanding. Pari Washington Company Pvt. Ltd is the second largest shareholder owning 9.5% of common stock, and CRISIL Limited holds about 8.8% of the company stock.

We also observed that the top 10 shareholders account for more than half of the share register, with a few smaller shareholders to balance the interests of the larger ones to a certain extent.

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 is some analyst coverage of the stock, but it could still become more well known, with time.

Insider Ownership Of CARE Ratings

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.

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 some shares in CARE Ratings Limited. As individuals, the insiders collectively own ₹490m worth of the ₹45b company. It is good to see some investment by insiders, but it might be worth checking if those insiders have been buying.

General Public Ownership

The general public, who are usually individual investors, hold a 37% stake in CARE Ratings. 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.

Public Company Ownership

Public companies currently own 9.9% of CARE Ratings stock. We can't be certain but it is quite possible this is a strategic stake. The businesses may be similar, or work together.

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. Case in point: We've spotted 1 warning sign for CARE Ratings you should be aware of.

But ultimately it is the future, not the past, that will determine how well the owners of this business will do. Therefore we think it advisable to take a look at this free report showing whether analysts are predicting a brighter 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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.