Is Fletcher Building Limited (NZSE:FBU) Popular Amongst Institutions?

By
Simply Wall St
Published
November 17, 2020
NZSE:FBU

The big shareholder groups in Fletcher Building Limited (NZSE:FBU) have power over the company. 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.

Fletcher Building is a pretty big company. It has a market capitalization of NZ$4.5b. Normally institutions would own a significant portion of a company this size. Our analysis of the ownership of the company, below, shows that institutional investors have bought into the company. We can zoom in on the different ownership groups, to learn more about Fletcher Building.

See our latest analysis for Fletcher Building

ownership-breakdown
NZSE:FBU Ownership Breakdown November 18th 2020

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 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 Fletcher Building's historic earnings and revenue below, but keep in mind there's always more to the story.

earnings-and-revenue-growth
NZSE:FBU Earnings and Revenue Growth November 18th 2020

Since institutional investors own more than half the issued stock, the board will likely have to pay attention to their preferences. We note that hedge funds don't have a meaningful investment in Fletcher Building. Looking at our data, we can see that the largest shareholder is Perpetual Investments Management Limited with 10.0% of shares outstanding. Meanwhile, the second and third largest shareholders, hold 6.5% and 5.8%, of the shares outstanding, respectively.

Looking at the shareholder registry, we can see that 51% of the ownership is controlled by the top 13 shareholders, meaning that no single shareholder has a majority interest in the ownership.

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 are plenty of analysts covering the stock, so it might be worth seeing what they are forecasting, too.

Insider Ownership Of Fletcher Building

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.

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 information suggests that Fletcher Building Limited insiders own under 1% of the company. Keep in mind that it's a big company, and the insiders own NZ$21m worth of shares. The absolute value might be more important than the proportional share. It is good to see board members owning shares, but it might be worth checking if those insiders have been buying.

General Public Ownership

With a 42% ownership, the general public have some degree of sway over Fletcher Building. 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:

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. To that end, you should learn about the 2 warning signs we've spotted with Fletcher Building (including 1 which is is concerning) .

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. 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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