In the wake of Washington Real Estate Investment Trust's (NYSE:WRE) latest US$113m market cap drop, institutional owners may be forced to take severe actions

Published
August 08, 2022
NYSE:WRE
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If you want to know who really controls Washington Real Estate Investment Trust (NYSE:WRE), then you'll have to look at the makeup of its share registry. The group holding the most number of shares in the company, around 89% 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 endured the highest losses after the company's share price fell by 5.8% last week. Needless to say, the recent loss which further adds to the one-year loss to shareholders of 11% might not go down well especially with this category of 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 Washington Real Estate Investment Trust which might hurt individual investors.

Let's delve deeper into each type of owner of Washington Real Estate Investment Trust, beginning with the chart below.

Check out our latest analysis for Washington Real Estate Investment Trust

ownership-breakdown
NYSE:WRE Ownership Breakdown August 8th 2022

What Does The Institutional Ownership Tell Us About Washington Real Estate Investment 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.

Washington Real Estate Investment Trust already has institutions on the share registry. Indeed, they own a respectable stake in the company. This implies the analysts working for those institutions have looked at the stock and they like it. But just like anyone else, they could be wrong. 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 Washington Real Estate Investment Trust's earnings history below. Of course, the future is what really matters.

earnings-and-revenue-growth
NYSE:WRE Earnings and Revenue Growth August 8th 2022

Institutional investors own over 50% of the company, so together than can probably strongly influence board decisions. Hedge funds don't have many shares in Washington Real Estate Investment Trust. Looking at our data, we can see that the largest shareholder is BlackRock, Inc. with 18% of shares outstanding. For context, the second largest shareholder holds about 16% of the shares outstanding, followed by an ownership of 11% by the third-largest shareholder.

Our research also brought to light the fact that roughly 51% of the company is controlled by the top 4 shareholders suggesting that these owners wield significant influence on the business.

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 plenty of analysts covering the stock, so it might be worth seeing what they are forecasting, too.

Insider Ownership Of Washington Real Estate Investment Trust

While the precise definition of an insider can be subjective, almost everyone considers board members to be insiders. 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.

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 information suggests that Washington Real Estate Investment Trust insiders own under 1% of the company. It is a pretty big company, so it would be possible for board members to own a meaningful interest in the company, without owning much of a proportional interest. In this case, they own around US$17m worth of shares (at current prices). It is good to see board members owning shares, 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 3 warning signs for Washington Real Estate Investment Trust you should be aware of, and 2 of them are significant.

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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