Is Iluka Resources Limited (ASX:ILU) Popular Amongst Institutions?

Simply Wall St

Tue, Jul 14, 2020, 11:21 PM 5 min read

If you want to know who really controls Iluka Resources Limited (ASX:ILU), then you'll have to look at the makeup of its share registry. Institutions often own shares in more established companies, while it's not unusual to see insiders own a fair bit of smaller companies. Companies that used to be publicly owned tend to have lower insider ownership.

Iluka Resources isn't enormous, but it's not particularly small either. It has a market capitalization of AU$3.8b, which means it would generally expect to see some institutions on the share registry. In the chart below, we can see that institutional investors have bought into the company. Let's take a closer look to see what the different types of shareholder can tell us about Iluka Resources.

See our latest analysis for Iluka Resources

ownership-breakdown — ASX:ILU Ownership Breakdown July 15th 2020

What Does The Institutional Ownership Tell Us About Iluka Resources?

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.

Iluka Resources already has institutions on the share registry. Indeed, they own a respectable stake in the company. 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. 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 Iluka Resources, (below). Of course, keep in mind that there are other factors to consider, too.

earnings-and-revenue-growth — ASX:ILU Earnings and Revenue Growth July 15th 2020

Since institutional investors own more than half the issued stock, the board will likely have to pay attention to their preferences. Iluka Resources is not owned by hedge funds. The company's largest shareholder is Schroder Investment Management Limited, with ownership of 7.9%. Meanwhile, the second and third largest shareholders, hold 7.3% and 6.7%, of the shares outstanding, respectively.

We did some more digging and found that 10 of the top shareholders account for roughly 52% of the register, implying that along with larger shareholders, there are a few smaller shareholders, thereby balancing out each others interests somewhat.

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 Iluka Resources

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 data suggests that insiders own under 1% of Iluka Resources Limited in their own names. It is a pretty big company, so it would be possible for board members to own a meaningful interest in the company, without owning much of a proportional interest. In this case, they own around AU$6.6m worth of shares (at current prices). Arguably, recent buying and selling is just as important to consider. You can click here to see if insiders have been buying or selling.

General Public Ownership

The general public holds a 35% stake in ILU. While this size of ownership may not be enough to sway a policy decision in their favour, they can still make a collective impact on company policies.

Next Steps:

I find it very interesting to look at who exactly owns a company. But to truly gain insight, we need to consider other information, too.

I like to dive deeper into how a company has performed in the past. You can access this interactive graph of past earnings, revenue and cash flow, for free.

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.

This article by Simply Wall St is general in nature. 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.

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