Every investor in Steel Dynamics, Inc. (NASDAQ:STLD) should be aware of the most powerful shareholder groups. Institutions often own shares in more established companies, while it's not unusual to see insiders own a fair bit of smaller companies. Warren Buffett said that he likes "a business with enduring competitive advantages that is run by able and owner-oriented people." So it's nice to see some insider ownership, because it may suggest that management is owner-oriented.
Steel Dynamics is a pretty big company. It has a market capitalization of US$13b. Normally institutions would own a significant portion of a company this size. In the chart below, we can see that institutions own shares in the company. Let's take a closer look to see what the different types of shareholders can tell us about Steel Dynamics.
What Does The Institutional Ownership Tell Us About Steel Dynamics?
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 Steel Dynamics. 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 Steel Dynamics, (below). Of course, keep in mind that there are other factors to consider, too.
Investors should note that institutions actually own more than half the company, so they can collectively wield significant power. Steel Dynamics is not owned by hedge funds. BlackRock, Inc. is currently the largest shareholder, with 13% of shares outstanding. The Vanguard Group, Inc. is the second largest shareholder owning 11% of common stock, and State Street Global Advisors, Inc. holds about 4.5% of the company stock. In addition, we found that Mark Millett, the CEO has 1.5% of the shares allocated to their name.
After doing some more digging, we found that the top 15 have the combined ownership of 51% in the company, suggesting that no single shareholder has significant control over the company.
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. 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 Steel Dynamics
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.
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 Steel Dynamics, Inc.. It is a very large company, and board members collectively own US$636m worth of shares (at current prices). I sometimes take an interest in whether they have been buying or selling.
General Public Ownership
The general public holds a 11% stake in Steel Dynamics. 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.
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. Take risks for example - Steel Dynamics has 4 warning signs (and 2 which are a bit unpleasant) we think you should know about.
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.
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