A great week that adds to Gemfields Group Limited's (JSE:GML) one-year returns, institutional investors who own 35% must be happy

Key Insights

• Institutions' substantial holdings in Gemfields Group implies that they have significant influence over the company's share price
• 56% of the business is held by the top 4 shareholders
• Insiders have bought recently

Every investor in Gemfields Group Limited (JSE:GML) should be aware of the most powerful shareholder groups. The group holding the most number of shares in the company, around 35% 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.

And as as result, institutional investors reaped the most rewards after the company's stock price gained 14% last week. The one-year return on investment is currently 4.6% and last week's gain would have been more than welcomed.

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

See our latest analysis for Gemfields Group

What Does The Institutional Ownership Tell Us About Gemfields 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.

Gemfields Group already has institutions on the share registry. Indeed, they own a respectable stake in the company. 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. 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 Gemfields Group's earnings history below. Of course, the future is what really matters.

Hedge funds don't have many shares in Gemfields Group. Assore Holdings Proprietary Limited is currently the largest shareholder, with 29% of shares outstanding. Meanwhile, the second and third largest shareholders, hold 10% and 9.8%, of the shares outstanding, respectively. Furthermore, CEO Sean Gilbertson is the owner of 1.5% of the company's shares.

On looking further, we found that 56% of the shares are owned by the top 4 shareholders. In other words, these shareholders have a meaningful say in the decisions of the company.

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. Quite a few analysts cover the stock, so you could look into forecast growth quite easily.

Insider Ownership Of Gemfields Group

The definition of an insider can differ slightly between different countries, but members of the board of directors always count. 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.

We can see that insiders own shares in Gemfields Group Limited. It has a market capitalization of just R4.0b, and insiders have R130m worth of shares, in their own names. This shows at least some alignment. You can click here to see if those insiders have been buying or selling.

General Public Ownership

The general public, who are usually individual investors, hold a 19% stake in Gemfields 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

With a stake of 10%, private equity firms could influence the Gemfields Group board. 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.

Private Company Ownership

It seems that Private Companies own 32%, of the Gemfields Group stock. It might be worth looking deeper into this. If related parties, such as insiders, have an interest in one of these private companies, that should be disclosed in the annual report. Private companies may also have a strategic interest in the company.

Next Steps:

While it is well worth considering the different groups that own a company, there are other factors that are even more important. Consider for instance, the ever-present spectre of investment risk. We've identified 4 warning signs with Gemfields Group (at least 2 which are potentially serious) , and understanding them should be part of your investment process.

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.