With 68% ownership, Exxaro Resources Limited (JSE:EXX) boasts of strong institutional backing

Key Insights

• Significantly high institutional ownership implies Exxaro Resources' stock price is sensitive to their trading actions
• The top 6 shareholders own 52% of the company
• Ownership research along with analyst forecasts data help provide a good understanding of opportunities in a stock

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Every investor in Exxaro Resources Limited (JSE:EXX) should be aware of the most powerful shareholder groups. With 68% stake, institutions possess the maximum shares in the company. That is, the group stands to benefit the most if the stock rises (or lose the most if there is a downturn).

Since institutional have access to huge amounts of capital, their market moves tend to receive a lot of scrutiny by retail or individual investors. As a result, a sizeable amount of institutional money invested in a firm is generally viewed as a positive attribute.

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

Check out 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.

We can see that Exxaro Resources does have institutional investors; and they hold a good portion of the company's stock. 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. 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 Exxaro Resources, (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. Exxaro Resources is not owned by hedge funds. Public Investment Corporation Limited is currently the largest shareholder, with 24% of shares outstanding. In comparison, the second and third largest shareholders hold about 11% and 6.6% of the stock.

We did some more digging and found that 6 of the top shareholders account for roughly 52% of the register, implying that along with larger shareholders, there are a few smaller shareholders, thereby balancing out each others interests somewhat.

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 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 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.

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 most recent data indicates that insiders own less than 1% of Exxaro Resources Limited. 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 R45m 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, who are usually individual investors, hold a 32% stake in Exxaro Resources. 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:

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. To that end, you should learn about the 2 warning signs we've spotted with Exxaro Resources (including 1 which doesn'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.