Institutional investors are Sappi Limited's (JSE:SAP) biggest bettors and were rewarded after last week's R1.9b market cap gain

Key Insights

• Given the large stake in the stock by institutions, Sappi's stock price might be vulnerable to their trading decisions
• 52% of the business is held by the top 3 shareholders
• Ownership research along with analyst forecasts data help provide a good understanding of opportunities in a stock

A look at the shareholders of Sappi Limited (JSE:SAP) can tell us which group is most powerful. And the group that holds the biggest piece of the pie are institutions 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 6.2% last week. The one-year return on investment is currently 39% and last week's gain would have been more than welcomed.

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

Check out our latest analysis for Sappi

What Does The Institutional Ownership Tell Us About Sappi?

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.

Sappi 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 Sappi's earnings history below. Of course, the future is what really matters.

Institutional investors own over 50% of the company, so together than can probably strongly influence board decisions. Hedge funds don't have many shares in Sappi. The company's largest shareholder is Allan Gray Proprietary Ltd., with ownership of 20%. Meanwhile, the second and third largest shareholders, hold 19% and 13%, of the shares outstanding, respectively.

A more detailed study of the shareholder registry showed us that 3 of the top shareholders have a considerable amount of ownership in the company, via their 52% stake.

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

Insider Ownership Of Sappi

The definition of company insiders can be subjective and does vary between jurisdictions. Our data reflects individual insiders, capturing board members at the very least. Management ultimately answers to the board. However, it is not uncommon for managers to be executive board members, especially if they are a founder or the CEO.

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 data suggests that insiders own under 1% of Sappi Limited in their own names. It's a big company, so even a small proportional interest can create alignment between the board and shareholders. In this case insiders own R100m worth of shares. It is good to see board members owning shares, but 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 Sappi. While this group can't necessarily call the shots, it can certainly have a real influence on how the company is run.

Next Steps:

It's always worth thinking about the different groups who own shares in a company. But to understand Sappi better, we need to consider many other factors. Be aware that Sappi is showing 4 warning signs in our investment analysis , and 2 of those don't sit too well with us...

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.