Are Institutions Heavily Invested In Fletcher Building Limited's (NZSE:FBU) Shares?

By
Simply Wall St
Published
June 14, 2021
NZSE:FBU
Source: Shutterstock

The big shareholder groups in Fletcher Building Limited (NZSE:FBU) have power over the company. Generally speaking, as a company grows, institutions will increase their ownership. Conversely, insiders often decrease their ownership over time. Companies that used to be publicly owned tend to have lower insider ownership.

With a market capitalization of NZ$6.5b, Fletcher Building is rather large. We'd expect to see institutional investors on the register. Companies of this size are usually well known to retail investors, too. In the chart below, we can see that institutions own shares in the company. We can zoom in on the different ownership groups, to learn more about Fletcher Building.

View our latest analysis for Fletcher Building

ownership-breakdown
NZSE:FBU Ownership Breakdown June 14th 2021

What Does The Institutional Ownership Tell Us About Fletcher Building?

Many institutions measure their performance against an index that approximates the local market. So they usually pay more attention to companies that are included in major indices.

We can see that Fletcher Building does have institutional investors; and they hold a good portion of the company's stock. 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. 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 Fletcher Building's earnings history below. Of course, the future is what really matters.

earnings-and-revenue-growth
NZSE:FBU Earnings and Revenue Growth June 14th 2021

Hedge funds don't have many shares in Fletcher Building. Looking at our data, we can see that the largest shareholder is The Vanguard Group, Inc. with 5.8% of shares outstanding. In comparison, the second and third largest shareholders hold about 5.7% and 5.0% of the stock.

Our studies suggest that the top 25 shareholders collectively control less than half of the company's shares, meaning that the company's shares are widely disseminated and there is no dominant shareholder.

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 Fletcher Building

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

I generally consider insider ownership to be a good thing. However, on some occasions it makes it more difficult for other shareholders to hold the board accountable for decisions.

Our data suggests that insiders own under 1% of Fletcher Building Limited in their own names. It's a big company, so even a small proportional interest can create alignment between the board and shareholders. In this case insiders own NZ$32m worth of shares. 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 56% of Fletcher Building. With this amount of ownership, retail investors can collectively play a role in decisions that affect shareholder returns, such as dividend policies and the appointment of directors. They can also exercise the power to vote on acquisitions or mergers that may not improve profitability.

Next Steps:

It's always worth thinking about the different groups who own shares in a company. But to understand Fletcher Building better, we need to consider many other factors. To that end, you should be aware of the 1 warning sign we've spotted with Fletcher Building .

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.

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This article by Simply Wall St is general in nature. 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.
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