Institutional investors may adopt severe steps after REN - Redes Energéticas Nacionais, SGPS, S.A.'s (ELI:RENE) latest 4.5% drop adds to a year losses

Key Insights

• Given the large stake in the stock by institutions, REN - Redes Energéticas Nacionais SGPS' stock price might be vulnerable to their trading decisions
• The top 4 shareholders own 50% of the company
• Using data from analyst forecasts alongside ownership research, one can better assess the future performance of a company

A look at the shareholders of REN - Redes Energéticas Nacionais, SGPS, S.A. (ELI:RENE) can tell us which group is most powerful. The group holding the most number of shares in the company, around 34% to be precise, is institutions. In other words, the group stands to gain the most (or lose the most) from their investment into the company.

And institutional investors saw their holdings value drop by 4.5% last week. Needless to say, the recent loss which further adds to the one-year loss to shareholders of 2.8% might not go down well especially with this category of shareholders. Often called “market movers", institutions wield significant power in influencing the price dynamics of any stock. Hence, if weakness in REN - Redes Energéticas Nacionais SGPS' share price continues, institutional investors may feel compelled to sell the stock, which might not be ideal for individual investors.

In the chart below, we zoom in on the different ownership groups of REN - Redes Energéticas Nacionais SGPS.

Check out our latest analysis for REN - Redes Energéticas Nacionais SGPS

What Does The Institutional Ownership Tell Us About REN - Redes Energéticas Nacionais SGPS?

Institutions typically measure themselves against a benchmark when reporting to their own investors, so they often become more enthusiastic about a stock once it's included in a major index. We would expect most companies to have some institutions on the register, especially if they are growing.

REN - Redes Energéticas Nacionais SGPS already has institutions on the share registry. Indeed, they own a respectable stake in the company. 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 REN - Redes Energéticas Nacionais SGPS' earnings history below. Of course, the future is what really matters.

REN - Redes Energéticas Nacionais SGPS is not owned by hedge funds. State Grid Corporation of China is currently the company's largest shareholder with 25% of shares outstanding. In comparison, the second and third largest shareholders hold about 12% and 7.5% of the stock.

On looking further, we found that 50% of the shares are owned by the top 4 shareholders. In other words, these shareholders have a meaningful say in the decisions of the company.

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 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 REN - Redes Energéticas Nacionais SGPS

The definition of company insiders can be subjective and does vary between jurisdictions. Our data reflects individual insiders, capturing board members at the very least. Company management run the business, but the CEO will answer to the board, even if he or she is a member of it.

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 most recent data indicates that insiders own less than 1% of REN - Redes Energéticas Nacionais, SGPS, S.A.. But they may have an indirect interest through a corporate structure that we haven't picked up on. Keep in mind that it's a big company, and the insiders own €84k worth of shares. The absolute value might be more important than the proportional share. Arguably, recent buying and selling is just as important to consider. You can click here to see if insiders have been buying or selling.

General Public Ownership

The general public-- including retail investors -- own 24% stake in the company, and hence can't easily be ignored. This size of ownership, while considerable, may not be enough to change company policy if the decision is not in sync with other large shareholders.

Private Equity Ownership

With a stake of 12%, private equity firms could influence the REN - Redes Energéticas Nacionais SGPS board. Some might like this, because private equity are sometimes activists who hold management accountable. But other times, private equity is selling out, having taking the company public.

Private Company Ownership

Our data indicates that Private Companies hold 25%, of the company's shares. It might be worth looking deeper into this. If related parties, such as insiders, have an interest in one of these private companies, that should be disclosed in the annual report. Private companies may also have a strategic interest in the company.

Public Company Ownership

It appears to us that public companies own 5.0% of REN - Redes Energéticas Nacionais SGPS. We can't be certain but it is quite possible this is a strategic stake. The businesses may be similar, or work together.

Next Steps:

It's always worth thinking about the different groups who own shares in a company. But to understand REN - Redes Energéticas Nacionais SGPS better, we need to consider many other factors. For example, we've discovered 3 warning signs for REN - Redes Energéticas Nacionais SGPS (2 are a bit unpleasant!) that you should be aware of before investing here.

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.