Institutional owners may ignore Netcare Limited's (JSE:NTC) recent R951m market cap decline as longer-term profits stay in the green

Key Insights

• Institutions' substantial holdings in Netcare implies that they have significant influence over the company's share price
• A total of 6 investors have a majority stake in the company with 51% ownership
• Analyst forecasts along with ownership data serve to give a strong idea about prospects for a business

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Every investor in Netcare Limited (JSE:NTC) should be aware of the most powerful shareholder groups. The group holding the most number of shares in the company, around 72% 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 R951m last week. However, the 19% one-year returns may have helped alleviate their overall losses. But they would probably be wary of future losses.

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

See our latest analysis for Netcare

What Does The Institutional Ownership Tell Us About Netcare?

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.

Netcare 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 Netcare's earnings history below. Of course, the future is what really matters.

Institutional investors own over 50% of the company, so together than can probably strongly influence board decisions. Our data indicates that hedge funds own 7.7% of Netcare. That worth noting, since hedge funds are often quite active investors, who may try to influence management. Many want to see value creation (and a higher share price) in the short term or medium term. Looking at our data, we can see that the largest shareholder is Public Investment Corporation Limited with 23% of shares outstanding. In comparison, the second and third largest shareholders hold about 7.7% and 6.7% of the stock.

On further inspection, we found that more than half the company's shares are owned by the top 6 shareholders, suggesting that the interests of the larger shareholders are balanced out to an extent by the smaller ones.

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 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 Netcare

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 Netcare Limited insiders own under 1% of the company. It has a market capitalization of just R16b, and the board has only R13m worth of shares in their own names. Many tend to prefer to see a board with bigger shareholdings. A good next step might be to take a look at this free summary of insider buying and selling.

General Public Ownership

The general public, who are usually individual investors, hold a 20% stake in Netcare. While this group can't necessarily call the shots, it can certainly have a real influence on how the company is run.

Next Steps:

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

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.