KMD Brands Limited's (NZSE:KMD) recent 15% pullback adds to one-year year losses, institutional owners may take drastic measures

Key Insights

• Significantly high institutional ownership implies KMD Brands' stock price is sensitive to their trading actions
• A total of 8 investors have a majority stake in the company with 52% ownership
• Ownership research along with analyst forecasts data help provide a good understanding of opportunities in a stock

To get a sense of who is truly in control of KMD Brands Limited (NZSE:KMD), it is important to understand the ownership structure of the business. The group holding the most number of shares in the company, around 45% to be precise, is institutions. That is, the group stands to benefit the most if the stock rises (or lose the most if there is a downturn).

And institutional investors saw their holdings value drop by 15% last week. The recent loss, which adds to a one-year loss of 48% 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 decline continues, institutional investors may be pressured to sell KMD Brands which might hurt individual investors.

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

See 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.

We can see that KMD Brands 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. 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 KMD Brands' historic earnings and revenue below, but keep in mind there's always more to the story.

We note that hedge funds don't have a meaningful investment in KMD Brands. The company's largest shareholder is Orbis Investment Management Limited, with ownership of 14%. New Zealand Superannuation Fund is the second largest shareholder owning 10% of common stock, and Yarra Funds Management Limited holds about 7.2% of the company stock.

On further inspection, we found that more than half the company's shares are owned by the top 8 shareholders, suggesting that the interests of the larger shareholders are balanced out to an extent by the smaller ones.

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

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.

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. But they may have an indirect interest through a corporate structure that we haven't picked up on. It has a market capitalization of just NZ$441m, and the board has only NZ$1.7m worth of shares in their own names. 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-- including retail investors -- own 38% 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.

Private Company Ownership

Our data indicates that Private Companies hold 6.9%, of the company's shares. Private companies may be related parties. Sometimes insiders have an interest in a public company through a holding in a private company, rather than in their own capacity as an individual. While it's hard to draw any broad stroke conclusions, it is worth noting as an area for further research.

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. Case in point: We've spotted 1 warning sign for KMD Brands you should be aware of.

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. 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.