Institutional shareholders may be less affected by James Hardie Industries plc's (ASX:JHX) pullback last week after a year of 5.6% returns

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

Thu, Aug 8, 2024, 6:24 PM 4 min read

Given the large stake in the stock by institutions, James Hardie Industries' stock price might be vulnerable to their trading decisions
53% of the business is held by the top 9 shareholders
Using data from analyst forecasts alongside ownership research, one can better assess the future performance of a company

A look at the shareholders of James Hardie Industries plc (ASX:JHX) can tell us which group is most powerful. With 73% stake, institutions possess the maximum shares in the company. Put another way, the group faces the maximum upside potential (or downside risk).

Institutional investors was the group most impacted after the company's market cap fell to AU$21b last week. However, the 5.6% one-year returns may have helped alleviate their overall losses. They should, however, be mindful of further losses in the future.

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

See our latest analysis for James Hardie Industries

ownership-breakdown — ASX:JHX Ownership Breakdown August 9th 2024

What Does The Institutional Ownership Tell Us About James Hardie Industries?

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 James Hardie Industries does have institutional investors; and they hold a good portion of the company's stock. 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. 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 James Hardie Industries' earnings history below. Of course, the future is what really matters.

earnings-and-revenue-growth — ASX:JHX Earnings and Revenue Growth August 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 James Hardie Industries. Our data shows that The Vanguard Group, Inc. is the largest shareholder with 10% of shares outstanding. With 8.0% and 7.7% of the shares outstanding respectively, Challenger Limited and BlackRock, Inc. are the second and third largest shareholders.

On further inspection, we found that more than half the company's shares are owned by the top 9 shareholders, suggesting that the interests of the larger shareholders are balanced out to an extent by the smaller ones.

While it makes sense to study institutional ownership data for a company, it also makes sense to study analyst sentiments to know which way the wind is blowing. Quite a few analysts cover the stock, so you could look into forecast growth quite easily.

Insider Ownership Of James Hardie Industries

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.

Most consider insider ownership a positive because it can indicate the board is well aligned with other shareholders. However, on some occasions too much power is concentrated within this group.

Our information suggests that James Hardie Industries plc insiders own under 1% of the company. It is a very large company, so it would be surprising to see insiders own a large proportion of the company. Though their holding amounts to less than 1%, we can see that board members collectively own AU$22m 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-- including retail investors -- own 27% stake in the company, and hence can't easily be ignored. While this group can't necessarily call the shots, it can certainly have a real influence on how the company is run.

Next Steps:

While it is well worth considering the different groups that own a company, there are other factors that are even more important. For instance, we've identified 1 warning sign for James Hardie Industries that you should be aware of.

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.

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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.