Institutional owners may take dramatic actions as Famous Brands Limited's (JSE:FBR) recent 10% drop adds to one-year losses

Key Insights

• Institutions' substantial holdings in Famous Brands implies that they have significant influence over the company's share price
• 52% of the business is held by the top 4 shareholders
• 10% of Famous Brands is held by insiders

To get a sense of who is truly in control of Famous Brands Limited (JSE:FBR), it is important to understand the ownership structure of the business. And the group that holds the biggest piece of the pie are institutions with 45% ownership. That is, the group stands to benefit the most if the stock rises (or lose the most if there is a downturn).

And institutional investors saw their holdings value drop by 10% last week. This set of investors may especially be concerned about the current loss, which adds to a one-year loss of 20% 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 Famous Brands which might hurt individual investors.

In the chart below, we zoom in on the different ownership groups of Famous Brands.

See our latest analysis for Famous Brands

What Does The Institutional Ownership Tell Us About Famous Brands?

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.

Famous Brands 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 Famous Brands, (below). Of course, keep in mind that there are other factors to consider, too.

It looks like hedge funds own 8.4% of Famous Brands shares. That catches my attention because hedge funds sometimes try to influence management, or bring about changes that will create near term value for shareholders. The company's largest shareholder is Coronation Fund Managers Limited, with ownership of 22%. Meanwhile, the second and third largest shareholders, hold 11% and 11%, of the shares outstanding, respectively.

On looking further, we found that 52% 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 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. We're not picking up on any analyst coverage of the stock at the moment, so the company is unlikely to be widely held.

Insider Ownership Of Famous Brands

While the precise definition of an insider can be subjective, almost everyone considers board members to be insiders. Company management run the business, but the CEO will answer to the board, even if he or she is a member of it.

I generally consider insider ownership to be a good thing. However, on some occasions it makes it more difficult for other shareholders to hold the board accountable for decisions.

It seems insiders own a significant proportion of Famous Brands Limited. It has a market capitalization of just R5.0b, and insiders have R523m worth of shares in their own names. This may suggest that the founders still own a lot of shares. You can click here to see if they have been buying or selling.

General Public Ownership

The general public, who are usually individual investors, hold a 25% stake in Famous Brands. 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.

Next Steps:

It's always worth thinking about the different groups who own shares in a company. But to understand Famous Brands better, we need to consider many other factors. Be aware that Famous Brands is showing 2 warning signs in our investment analysis , you should know about...

If you would prefer check out another company -- one with potentially superior financials -- then do not miss this free list of interesting companies, backed by strong financial data.

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.