Institutional investors control 66% of Covestro AG (ETR:1COV) and were rewarded last week after stock increased 3.5%

Unlock stock picks and a broker-level newsfeed that powers Wall Street.

editorial-team@simplywallst.com (Simply Wall St)

Mon, Apr 8, 2024, 10:40 PM 4 min read

Significantly high institutional ownership implies Covestro's stock price is sensitive to their trading actions
A total of 16 investors have a majority stake in the company with 51% ownership
Ownership research along with analyst forecasts data help provide a good understanding of opportunities in a stock

If you want to know who really controls Covestro AG (ETR:1COV), then you'll have to look at the makeup of its share registry. With 66% stake, institutions possess the maximum shares in the company. That is, the group stands to benefit the most if the stock rises (or lose the most if there is a downturn).

And things are looking up for institutional investors after the company gained €332m in market cap last week. The gains from last week would have further boosted the one-year return to shareholders which currently stand at 45%.

Let's take a closer look to see what the different types of shareholders can tell us about Covestro.

View our latest analysis for Covestro

ownership-breakdown — XTRA:1COV Ownership Breakdown April 9th 2024

What Does The Institutional Ownership Tell Us About Covestro?

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.

We can see that Covestro does have institutional investors; and they hold a good portion of the company's stock. 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 Covestro's historic earnings and revenue below, but keep in mind there's always more to the story.

earnings-and-revenue-growth — XTRA:1COV Earnings and Revenue Growth April 9th 2024

Since institutional investors own more than half the issued stock, the board will likely have to pay attention to their preferences. Hedge funds don't have many shares in Covestro. Our data shows that BlackRock, Inc. is the largest shareholder with 5.5% of shares outstanding. Merrill Lynch & Co. Inc., Banking Investments is the second largest shareholder owning 5.4% of common stock, and Amundi Asset Management SAS holds about 5.2% of the company stock.

A closer look at our ownership figures suggests that the top 16 shareholders have a combined ownership of 51% implying that no single shareholder has a majority.

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 are plenty of analysts covering the stock, so it might be worth seeing what they are forecasting, too.

Insider Ownership Of Covestro

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

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 most recent data indicates that insiders own less than 1% of Covestro AG. Being so large, we would not expect insiders to own a large proportion of the stock. Collectively, they own €3.4m of stock. It is good to see board members owning shares, but it might be worth checking if those insiders have been buying.

General Public Ownership

The general public-- including retail investors -- own 34% stake in the company, and hence can't easily be ignored. 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.

Next Steps:

It's always worth thinking about the different groups who own shares in a company. But to understand Covestro better, we need to consider many other factors.

I like to dive deeper into how a company has performed in the past. You can find historic revenue and earnings in this detailed graph.

Ultimately the future is most important. You can access this free report on analyst forecasts for the company.

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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.