Institutional owners may take dramatic actions as KMD Brands Limited's (NZSE:KMD) recent 10% drop adds to one-year losses

Key Insights

• Given the large stake in the stock by institutions, KMD Brands' stock price might be vulnerable to their trading decisions
• The top 5 shareholders own 51% of the company
• Insiders have bought recently

Trump has pledged to "unleash" American oil and gas and these 15 US stocks have developments that are poised to benefit.

A look at the shareholders of KMD Brands Limited (NZSE:KMD) can tell us which group is most powerful. The group holding the most number of shares in the company, around 45% to be precise, is institutions. Put another way, the group faces the maximum upside potential (or downside risk).

And institutional investors saw their holdings value drop by 10% last week. The recent loss, which adds to a one-year loss of 28% for stockholders, may not sit well with this group of investors. Institutions or "liquidity providers" control large sums of money and therefore, these types of investors usually have a lot of influence over stock price movements. As a result, if the downtrend continues, institutions may face pressures to sell KMD Brands, which might have negative implications on individual investors.

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

Check out our latest analysis for KMD Brands

What Does The Institutional Ownership Tell Us About KMD Brands?

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.

As you can see, institutional investors have a fair amount of stake in KMD Brands. 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. 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 KMD Brands, (below). Of course, keep in mind that there are other factors to consider, too.

Hedge funds don't have many shares in KMD Brands. Orbis Investment Management Limited is currently the largest shareholder, with 18% of shares outstanding. In comparison, the second and third largest shareholders hold about 13% and 7.8% of the stock.

Our research also brought to light the fact that roughly 51% of the company is controlled by the top 5 shareholders suggesting that these owners wield significant influence on the business.

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 a reasonable number of analysts covering the stock, so it might be useful to find out their aggregate view on the future.

Insider Ownership Of KMD Brands

While the precise definition of an insider can be subjective, almost everyone considers board members to be insiders. 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 data suggests that insiders own under 1% of KMD Brands Limited in their own names. It appears that the board holds about NZ$1.2m worth of stock. This compares to a market capitalization of NZ$221m. Many investors in smaller companies prefer to see the board more heavily invested. You can click here to see if those insiders have been buying or selling.

General Public Ownership

The general public, who are usually individual investors, hold a 34% stake in KMD Brands. 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.

Public Company Ownership

It appears to us that public companies own 6.7% of KMD Brands. It's hard to say for sure but this suggests they have entwined business interests. This might be a strategic stake, so it's worth watching this space for changes in ownership.

Next Steps:

While it is well worth considering the different groups that own a company, there are other factors that are even more important.

Many find it useful to take an in depth look at how a company has performed in the past. You can access this detailed graph of past earnings, revenue and cash flow.

Ultimately the future is most important. You can access this free report on analyst forecasts for the company.

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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.