Institutional owners may ignore Momentum Group Limited's (JSE:MTM) recent R2.1b market cap decline as longer-term profits stay in the green

Key Insights

• Significantly high institutional ownership implies Momentum Group's stock price is sensitive to their trading actions
• A total of 7 investors have a majority stake in the company with 51% ownership
• Recent purchases by insiders

Every investor in Momentum Group Limited (JSE:MTM) should be aware of the most powerful shareholder groups. The group holding the most number of shares in the company, around 57% 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 was the group most impacted after the company's market cap fell to R40b last week. However, the 42% one-year returns may have helped alleviate their overall losses. But they would probably be wary of future losses.

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

Check out our latest analysis for Momentum Group

What Does The Institutional Ownership Tell Us About Momentum Group?

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.

We can see that Momentum Group does have institutional investors; and they hold a good portion of the company's stock. This suggests some credibility amongst professional investors. But we can't rely on that fact alone since institutions make bad investments sometimes, just like everyone does. 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 Momentum Group, (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. Momentum Group is not owned by hedge funds. Looking at our data, we can see that the largest shareholder is Public Investment Corporation Limited with 16% of shares outstanding. In comparison, the second and third largest shareholders hold about 8.4% and 8.2% of the stock.

We did some more digging and found that 7 of the top shareholders account for roughly 51% of the register, implying that along with larger shareholders, there are a few smaller shareholders, thereby balancing out each others interests somewhat.

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 Momentum Group

While the precise definition of an insider can be subjective, almost everyone considers board members to be insiders. The company management answer to the board and the latter should represent the interests of shareholders. Notably, sometimes top-level managers are on the board themselves.

Insider ownership is positive when it signals leadership are thinking like the true owners of the company. However, high insider ownership can also give immense power to a small group within the company. This can be negative in some circumstances.

Our information suggests that Momentum Group Limited 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 R71m worth of shares (at current prices). It is always good to see at least some insider ownership, but it might be worth checking if those insiders have been selling.

General Public Ownership

With a 34% ownership, the general public, mostly comprising of individual investors, have some degree of sway over Momentum Group. 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.

Private Equity Ownership

Private equity firms hold a 8.4% stake in Momentum Group. This suggests they can be influential in key policy decisions. Some investors might be encouraged by this, since private equity are sometimes able to encourage strategies that help the market see the value in the company. Alternatively, those holders might be exiting the investment after taking it public.

Next Steps:

It's always worth thinking about the different groups who own shares in a company. But to understand Momentum Group better, we need to consider many other factors. Consider risks, for instance. Every company has them, and we've spotted 1 warning sign for Momentum Group 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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.