A fantastic week for AECI Ltd's (JSE:AFE) 70% institutional owners, one-year returns continue to impress

Key Insights

• Significantly high institutional ownership implies AECI's stock price is sensitive to their trading actions
• A total of 6 investors have a majority stake in the company with 54% ownership
• Ownership research, combined with past performance data can help provide a good understanding of opportunities in a stock

Every investor in AECI Ltd (JSE:AFE) should be aware of the most powerful shareholder groups. We can see that institutions own the lion's share in the company with 70% ownership. Put another way, the group faces the maximum upside potential (or downside risk).

And as as result, institutional investors reaped the most rewards after the company's stock price gained 15% last week. The one-year return on investment is currently 2.5% and last week's gain would have been more than welcomed.

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

View our latest analysis for AECI

What Does The Institutional Ownership Tell Us About AECI?

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.

As you can see, institutional investors have a fair amount of stake in AECI. 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. 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 AECI's historic earnings and revenue below, but keep in mind there's always more to the story.

Institutional investors own over 50% of the company, so together than can probably strongly influence board decisions. AECI is not owned by hedge funds. Our data shows that Public Investment Corporation Limited is the largest shareholder with 24% of shares outstanding. PSG Fund Management is the second largest shareholder owning 10% of common stock, and Coronation Fund Managers Limited holds about 6.1% of the company stock.

We did some more digging and found that 6 of the top shareholders account for roughly 54% of the register, implying that along with larger shareholders, there are a few smaller shareholders, thereby balancing out each others interests somewhat.

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 is some analyst coverage of the stock, but it could still become more well known, with time.

Insider Ownership Of AECI

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.

Most consider insider ownership a positive because it can indicate the board is well aligned with other shareholders. However, on some occasions too much power is concentrated within this group.

Our information suggests that AECI Ltd insiders own under 1% of the company. It appears that the board holds about R5.5m worth of stock. This compares to a market capitalization of R10b. 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

With a 30% ownership, the general public, mostly comprising of individual investors, have some degree of sway over AECI. While this group can't necessarily call the shots, it can certainly have a real influence on how the company is run.

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 example, we've discovered 1 warning sign for AECI that you should be aware of before investing here.

If you are like me, you may want to think about whether this company will grow or shrink. Luckily, you can check this free report showing analyst forecasts for its 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.