Do Institutions Own The a2 Milk Company Limited (NZSE:ATM) Shares?

By
Simply Wall St
Published
December 25, 2021
NZSE:ATM
Source: Shutterstock

Every investor in The a2 Milk Company Limited (NZSE:ATM) should be aware of the most powerful shareholder groups. Large companies usually have institutions as shareholders, and we usually see insiders owning shares in smaller companies. Companies that used to be publicly owned tend to have lower insider ownership.

With a market capitalization of NZ$4.4b, a2 Milk is a decent size, so it is probably on the radar of institutional investors. Our analysis of the ownership of the company, below, shows that institutional investors have bought into the company. Let's take a closer look to see what the different types of shareholders can tell us about a2 Milk.

View our latest analysis for a2 Milk

ownership-breakdown
NZSE:ATM Ownership Breakdown December 25th 2021

What Does The Institutional Ownership Tell Us About a2 Milk?

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.

We can see that a2 Milk does have institutional investors; and they hold a good portion of the company's stock. 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 a2 Milk, (below). Of course, keep in mind that there are other factors to consider, too.

earnings-and-revenue-growth
NZSE:ATM Earnings and Revenue Growth December 25th 2021

Institutional investors own over 50% of the company, so together than can probably strongly influence board decisions. a2 Milk is not owned by hedge funds. The company's largest shareholder is Perpetual Limited, with ownership of 6.1%. The second and third largest shareholders are The Vanguard Group, Inc. and J O Hambro Capital Management Limited, with an equal amount of shares to their name at 5.0%.

After doing some more digging, we found that the top 16 have the combined ownership of 50% in the company, suggesting that no single shareholder has significant control over the company.

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 a2 Milk

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. 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 The a2 Milk Company Limited insiders own under 1% of the company. Keep in mind that it's a big company, and the insiders own NZ$18m worth of shares. The absolute value might be more important than the proportional share. It is always good to see at least some insider ownership, but it might be worth checking if those insiders have been selling.

General Public Ownership

With a 41% ownership, the general public, mostly comprising of individual investors, have some degree of sway over a2 Milk. 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.

Next Steps:

It's always worth thinking about the different groups who own shares in a company. But to understand a2 Milk better, we need to consider many other factors. Consider for instance, the ever-present spectre of investment risk. We've identified 3 warning signs with a2 Milk , and understanding them should be part of your investment process.

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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