The a2 Milk Company Limited's (NZSE:ATM) high institutional ownership speaks for itself as stock continues to impress, up 18% over last week

Key Insights

• Given the large stake in the stock by institutions, a2 Milk's stock price might be vulnerable to their trading decisions
• The top 16 shareholders own 50% of the company
• Analyst forecasts along with ownership data serve to give a strong idea about prospects for a business

To get a sense of who is truly in control of The a2 Milk Company Limited (NZSE:ATM), 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 53% 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 NZ$5.0b in market cap. The gains from last week would have further boosted the one-year return to shareholders which currently stand at 55%.

Let's delve deeper into each type of owner of a2 Milk, beginning with the chart below.

View our latest analysis for a2 Milk

What Does The Institutional Ownership Tell Us About a2 Milk?

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 a2 Milk. 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. If multiple institutions change their view on a stock at the same time, you could see the share price drop fast. It's therefore worth looking at a2 Milk's earnings history below. Of course, the future is what really matters.

Institutional investors own over 50% of the company, so together than can probably strongly influence board decisions. Hedge funds don't have many shares in a2 Milk. Looking at our data, we can see that the largest shareholder is Perpetual Limited with 6.5% of shares outstanding. Meanwhile, the second and third largest shareholders, hold 5.5% and 5.5%, of the shares outstanding, respectively.

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. Quite a few analysts cover the stock, so you could look into forecast growth quite easily.

Insider Ownership Of a2 Milk

The definition of an insider can differ slightly between different countries, but members of the board of directors always count. 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.

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 information suggests that The a2 Milk Company Limited insiders own under 1% of the company. It is a pretty big company, so it would be possible for board members to own a meaningful interest in the company, without owning much of a proportional interest. In this case, they own around NZ$14m worth of shares (at current prices). 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

The general public-- including retail investors -- own 47% 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:

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. To that end, you should be aware of the 1 warning sign we've spotted with a2 Milk .

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.