Institutional investors have a lot riding on KT&G Corporation (KRX:033780) with 48% ownership

Key Insights

• Significantly high institutional ownership implies KT&G's stock price is sensitive to their trading actions
• 50% of the business is held by the top 10 shareholders
• Analyst forecasts along with ownership data serve to give a strong idea about prospects for a business

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To get a sense of who is truly in control of KT&G Corporation (KRX:033780), it is important to understand the ownership structure of the business. We can see that institutions own the lion's share in the company with 48% ownership. Put another way, the group faces the maximum upside potential (or downside risk).

And last week, institutional investors ended up benefitting the most after the company hit ₩15t in market cap. One-year return to shareholders is currently 58% and last week’s gain was the icing on the cake.

In the chart below, we zoom in on the different ownership groups of KT&G.

View our latest analysis for KT&G

What Does The Institutional Ownership Tell Us About KT&G?

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 KT&G. This can indicate that the company has a certain degree of credibility in the investment community. However, it is best to be wary of relying on the supposed validation that comes with institutional investors. They too, get it wrong sometimes. 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 KT&G, (below). Of course, keep in mind that there are other factors to consider, too.

Hedge funds don't have many shares in KT&G. Our data shows that First Eagle Investment Management, LLC is the largest shareholder with 9.4% of shares outstanding. IBK Asset Management Co., Ltd. is the second largest shareholder owning 9.1% of common stock, and National Pension Service holds about 8.8% of the company stock.

On further inspection, we found that more than half the company's shares are owned by the top 10 shareholders, suggesting that the interests of the larger shareholders are balanced out to an extent by the smaller ones.

While it makes sense to study institutional ownership data for a company, it also makes sense to study analyst sentiments to know which way the wind is blowing. There are plenty of analysts covering the stock, so it might be worth seeing what they are forecasting, too.

Insider Ownership Of KT&G

While the precise definition of an insider can be subjective, almost everyone considers board members to be insiders. 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 data suggests that insiders own under 1% of KT&G Corporation in their own names. 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 ₩1.5b 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 42% stake in the company, and hence can't easily be ignored. 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:

While it is well worth considering the different groups that own a company, there are other factors that are even more important. Take risks for example - KT&G has 1 warning sign we think you should be aware of.

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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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.