Institutional investors in Exxaro Resources Limited (JSE:EXX) see R1.8b decrease in market cap last week, although long-term gains have benefitted them.

Key Insights

• Institutions' substantial holdings in Exxaro Resources implies that they have significant influence over the company's share price
• The top 5 shareholders own 51% of the company
• Using data from analyst forecasts alongside ownership research, one can better assess the future performance of a company

To get a sense of who is truly in control of Exxaro Resources Limited (JSE:EXX), it is important to understand the ownership structure of the business. The group holding the most number of shares in the company, around 47% 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.

Institutional investors endured the highest losses after the company's market cap fell by R1.8b last week. However, the 24% one-year return to shareholders might have softened the blow. But they would probably be wary of future losses.

Let's delve deeper into each type of owner of Exxaro Resources, beginning with the chart below.

See our latest analysis for Exxaro Resources

What Does The Institutional Ownership Tell Us About Exxaro Resources?

Institutional investors commonly compare their own returns to the returns of a commonly followed index. So they generally do consider buying larger companies that are included in the relevant benchmark index.

Exxaro Resources 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. When multiple institutions own a stock, there's always a risk that they are in a 'crowded trade'. When such a trade goes wrong, multiple parties may compete to sell stock fast. This risk is higher in a company without a history of growth. You can see Exxaro Resources' historic earnings and revenue below, but keep in mind there's always more to the story.

Exxaro Resources is not owned by hedge funds. Our data shows that Public Investment Corporation Limited is the largest shareholder with 22% of shares outstanding. M&G Investment Management Limited is the second largest shareholder owning 12% of common stock, and Coronation Fund Managers Limited holds about 9.3% of the company stock.

On looking further, we found that 51% of the shares are owned by the top 5 shareholders. In other words, these shareholders have a meaningful say in the decisions of the company.

While studying institutional ownership for a company can add value to your research, it is also a good practice to research analyst recommendations to get a deeper understand of a stock's expected performance. There are plenty of analysts covering the stock, so it might be worth seeing what they are forecasting, too.

Insider Ownership Of Exxaro Resources

The definition of company insiders can be subjective and does vary between jurisdictions. Our data reflects individual insiders, capturing board members at the very least. 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.

Our information suggests that Exxaro Resources Limited insiders own under 1% of the company. It's a big company, so even a small proportional interest can create alignment between the board and shareholders. In this case insiders own R38m worth of shares. Arguably, recent buying and selling is just as important to consider. You can click here to see if insiders have been buying or selling.

General Public Ownership

The general public, who are usually individual investors, hold a 31% stake in Exxaro Resources. 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:

It's always worth thinking about the different groups who own shares in a company. But to understand Exxaro Resources better, we need to consider many other factors. Case in point: We've spotted 2 warning signs for Exxaro Resources you should be aware of, and 1 of them is potentially serious.

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.