PPC Ltd's (JSE:PPC) institutional investors lost 10% last week but have benefitted from longer-term gains

Key Insights

• Significantly high institutional ownership implies PPC's stock price is sensitive to their trading actions
• The top 5 shareholders own 53% of the company
• Past performance of a company along with ownership data serve to give a strong idea about prospects for a business

To get a sense of who is truly in control of PPC Ltd (JSE:PPC), it is important to understand the ownership structure of the business. The group holding the most number of shares in the company, around 61% to be precise, is institutions. Put another way, the group faces the maximum upside potential (or downside risk).

No shareholder likes losing money on their investments, especially institutional investors who saw their holdings drop 10% in value last week. However, the 13% one-year return to shareholders may have helped lessen their pain. But they would probably be wary of future losses.

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

See our latest analysis for PPC

What Does The Institutional Ownership Tell Us About PPC?

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.

As you can see, institutional investors have a fair amount of stake in PPC. 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 PPC, (below). Of course, keep in mind that there are other factors to consider, too.

Investors should note that institutions actually own more than half the company, so they can collectively wield significant power. Hedge funds don't have many shares in PPC. Our data shows that Value Capital Partners is the largest shareholder with 16% of shares outstanding. In comparison, the second and third largest shareholders hold about 14% and 11% of the stock.

Our research also brought to light the fact that roughly 53% of the company is controlled by the top 5 shareholders suggesting that these owners wield significant influence on the business.

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. Our information suggests that there isn't any analyst coverage of the stock, so it is probably little known.

Insider Ownership Of PPC

While the precise definition of an insider can be subjective, almost everyone considers board members to be insiders. 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 most recent data indicates that insiders own less than 1% of PPC Ltd. It appears that the board holds about R4.1m worth of stock. This compares to a market capitalization of R4.7b. We generally like to see a board more invested. However it might be worth checking if those insiders have been buying.

General Public Ownership

With a 11% ownership, the general public, mostly comprising of individual investors, have some degree of sway over PPC. 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 an ownership of 16%, private equity firms are in a position to play a role in shaping corporate strategy with a focus on value creation. 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:

While it is well worth considering the different groups that own a company, there are other factors that are even more important. To that end, you should learn about the 3 warning signs we've spotted with PPC (including 1 which doesn't sit too well with us) .

Of course this may not be the best stock to buy. Therefore, you may wish to see our free collection of interesting prospects boasting favorable financials.

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.