Institutional investors have a lot riding on Lument Finance Trust, Inc. (NYSE:LFT) with 40% ownership

Key Insights

• Given the large stake in the stock by institutions, Lument Finance Trust's stock price might be vulnerable to their trading decisions
• The top 5 shareholders own 51% of the company
• Insiders have been buying lately

If you want to know who really controls Lument Finance Trust, Inc. (NYSE:LFT), then you'll have to look at the makeup of its share registry. With 40% stake, institutions possess the maximum shares in the company. Put another way, the group faces the maximum upside potential (or downside risk).

Last week’s 12% gain means that institutional investors were on the positive end of the spectrum even as the company has shown strong longer-term trends. One-year return to shareholders is currently 40% and last week’s gain was the icing on the cake.

In the chart below, we zoom in on the different ownership groups of Lument Finance Trust.

Check out our latest analysis for Lument Finance Trust

What Does The Institutional Ownership Tell Us About Lument Finance Trust?

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.

We can see that Lument Finance Trust 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. 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 Lument Finance Trust's earnings history below. Of course, the future is what really matters.

We note that hedge funds don't have a meaningful investment in Lument Finance Trust. Looking at our data, we can see that the largest shareholder is Boston Partners Global Investors, Inc. with 27% of shares outstanding. In comparison, the second and third largest shareholders hold about 11% and 6.4% of the stock. Furthermore, CEO James Flynn is the owner of 0.6% of the company's shares.

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.

While it makes sense to study institutional ownership data for a company, it also makes sense to study analyst sentiments to know which way the wind is blowing. Quite a few analysts cover the stock, so you could look into forecast growth quite easily.

Insider Ownership Of Lument Finance Trust

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

We can report that insiders do own shares in Lument Finance Trust, Inc.. In their own names, insiders own US$3.4m worth of stock in the US$130m company. Some would say this shows alignment of interests between shareholders and the board, though we generally prefer to see bigger insider holdings. But it might be worth checking if those insiders have been selling.

General Public Ownership

The general public, who are usually individual investors, hold a 39% stake in Lument Finance Trust. 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.

Private Company Ownership

We can see that Private Companies own 11%, of the shares on issue. It's hard to draw any conclusions from this fact alone, so its worth looking into who owns those private companies. Sometimes insiders or other related parties have an interest in shares in a public company through a separate private company.

Public Company Ownership

Public companies currently own 6.4% of Lument Finance Trust stock. 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:

It's always worth thinking about the different groups who own shares in a company. But to understand Lument Finance Trust better, we need to consider many other factors. To that end, you should learn about the 2 warning signs we've spotted with Lument Finance Trust (including 1 which is concerning) .

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.

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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.