Every investor in Harvey Norman Holdings Limited (ASX:HVN) should be aware of the most powerful shareholder groups. Generally speaking, as a company grows, institutions will increase their ownership. Conversely, insiders often decrease their ownership over time. I quite like to see at least a little bit of insider ownership. As Charlie Munger said 'Show me the incentive and I will show you the outcome.
Harvey Norman Holdings has a market capitalization of AU$5.5b, so it's too big to fly under the radar. We'd expect to see both institutions and retail investors owning a portion of the company. Taking a look at our data on the ownership groups (below), it seems that institutions are noticeable on the share registry. Let's take a closer look to see what the different types of shareholders can tell us about Harvey Norman Holdings.
What Does The Institutional Ownership Tell Us About Harvey Norman Holdings?
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.
Harvey Norman Holdings 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. 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 Harvey Norman Holdings' historic earnings and revenue below, but keep in mind there's always more to the story.
ASX:HVN Earnings and Revenue Growth June 2nd 2022
Hedge funds don't have many shares in Harvey Norman Holdings. Our data suggests that Gerald Harvey, who is also the company's Top Key Executive, holds the most number of shares at 34%. When an insider holds a sizeable amount of a company's stock, investors consider it as a positive sign because it suggests that insiders are willing to have their wealth tied up in the future of the company. Meanwhile, the second and third largest shareholders, hold 16% and 4.7%, of the shares outstanding, respectively. Additionally, the company's CEO Kay Lesley Page directly holds 1.6% of the total shares outstanding.
A more detailed study of the shareholder registry showed us that 2 of the top shareholders have a considerable amount of ownership in the company, via their 50% stake.
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 Harvey Norman Holdings
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.
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 insiders maintain a significant holding in Harvey Norman Holdings Limited. It is very interesting to see that insiders have a meaningful AU$2.2b stake in this AU$5.5b business. Most would be pleased to see the board is investing alongside them. You may wish to access this free chart showing recent trading by insiders.
General Public Ownership
The general public, who are usually individual investors, hold a 28% stake in Harvey Norman Holdings. While this group can't necessarily call the shots, it can certainly have a real influence on how the company is run.
Private Company Ownership
We can see that Private Companies own 18%, of the shares on issue. It might be worth looking deeper into this. If related parties, such as insiders, have an interest in one of these private companies, that should be disclosed in the annual report. Private companies may also have a strategic interest in 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.
