Institutional owners may take dramatic actions as Radius Recycling, Inc.'s (NASDAQ:RDUS) recent 9.7% drop adds to one-year losses

Key Insights

• Institutions' substantial holdings in Radius Recycling implies that they have significant influence over the company's share price
• The top 10 shareholders own 50% of the company
• Insiders have sold recently

Every investor in Radius Recycling, Inc. (NASDAQ:RDUS) should be aware of the most powerful shareholder groups. The group holding the most number of shares in the company, around 83% to be precise, is institutions. Put another way, the group faces the maximum upside potential (or downside risk).

As a result, institutional investors endured the highest losses last week after market cap fell by US$52m. This set of investors may especially be concerned about the current loss, which adds to a one-year loss of 39% for shareholders. Also referred to as "smart money", institutions have a lot of sway over how a stock's price moves. As a result, if the decline continues, institutional investors may be pressured to sell Radius Recycling which might hurt individual investors.

Let's take a closer look to see what the different types of shareholders can tell us about Radius Recycling.

View our latest analysis for Radius Recycling

What Does The Institutional Ownership Tell Us About Radius Recycling?

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.

Radius Recycling already has institutions on the share registry. Indeed, they own a respectable stake in the company. 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. 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 Radius Recycling, (below). Of course, keep in mind that there are other factors to consider, too.

Since institutional investors own more than half the issued stock, the board will likely have to pay attention to their preferences. Radius Recycling is not owned by hedge funds. BlackRock, Inc. is currently the largest shareholder, with 12% of shares outstanding. Meanwhile, the second and third largest shareholders, hold 7.6% and 6.6%, of the shares outstanding, respectively. Furthermore, CEO Tamara Lundgren is the owner of 3.8% of the company's shares.

We also observed that the top 10 shareholders account for more than half of the share register, with a few smaller shareholders to balance the interests of the larger ones to a certain extent.

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 is a little analyst coverage of the stock, but not much. So there is room for it to gain more coverage.

Insider Ownership Of Radius Recycling

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

Insider ownership is positive when it signals leadership are thinking like the true owners of the company. However, high insider ownership can also give immense power to a small group within the company. This can be negative in some circumstances.

Shareholders would probably be interested to learn that insiders own shares in Radius Recycling, Inc.. As individuals, the insiders collectively own US$30m worth of the US$490m company. It is good to see some investment by insiders, but it might be worth checking if those insiders have been buying.

General Public Ownership

The general public-- including retail investors -- own 10% 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.

Next Steps:

While it is well worth considering the different groups that own a company, there are other factors that are even more important. Case in point: We've spotted 4 warning signs for Radius Recycling you should be aware of, and 3 of them don't sit too well with us.

If you would prefer discover what analysts are predicting in terms of future growth, do not miss this free report on analyst forecasts.

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.