Institutional investors are Santam Ltd's (JSE:SNT) biggest bettors and were rewarded after last week's R1.3b market cap gain

Key Insights

• Institutions' substantial holdings in Santam implies that they have significant influence over the company's share price
• The largest shareholder of the company is Sanlam Investment Management (Pty) Ltd. with a 60% stake
• 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 Santam Ltd (JSE:SNT), it is important to understand the ownership structure of the business. The group holding the most number of shares in the company, around 75% 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.

Last week’s 3.1% gain means that institutional investors were on the positive end of the spectrum even as the company has shown strong longer-term trends. One-year return to shareholders is currently 44% and last week’s gain was the icing on the cake.

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

View our latest analysis for Santam

What Does The Institutional Ownership Tell Us About Santam?

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 Santam does have institutional investors; and they hold a good portion of the company's stock. 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 Santam, (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. Hedge funds don't have many shares in Santam. Looking at our data, we can see that the largest shareholder is Sanlam Investment Management (Pty) Ltd. with 60% of shares outstanding. This implies that they have majority interest control of the future of the company. Public Investment Corporation Limited is the second largest shareholder owning 5.0% of common stock, and Ninety One UK Limited holds about 4.1% of the company stock.

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 plenty of analysts covering the stock, so it might be worth seeing what they are forecasting, too.

Insider Ownership Of Santam

The definition of an insider can differ slightly between different countries, but members of the board of directors always count. Company management run the business, but the CEO will answer to the board, even if he or she is a member of it.

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 Santam Ltd insiders own under 1% of the company. Keep in mind that it's a big company, and the insiders own R38m worth of shares. The absolute value might be more important than the proportional share. 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 25% stake in Santam. 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:

While it is well worth considering the different groups that own a company, there are other factors that are even more important. For instance, we've identified 1 warning sign for Santam that you should be aware of.

But ultimately it is the future, not the past, that will determine how well the owners of this business will do. Therefore we think it advisable to take a look at this free report showing whether analysts are predicting a brighter future.

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.