A look at the shareholders of Cairn Homes plc (LON:CRN) can tell us which group is most powerful. With 54% stake, institutions possess the maximum shares in the company. Put another way, the group faces the maximum upside potential (or downside risk).
Institutional investors would appreciate the 9.6% increase in share prices last week, given their one-year returns have been disappointing at 16%.
Let's delve deeper into each type of owner of Cairn Homes, beginning with the chart below.
What Does The Institutional Ownership Tell Us About Cairn Homes?
Many institutions measure their performance against an index that approximates the local market. So they usually pay more attention to companies that are included in major indices.
Cairn Homes already has institutions on the share registry. Indeed, they own a respectable stake in the company. 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. 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 Cairn Homes' historic earnings and revenue below, but keep in mind there's always more to the story.
LSE:CRN Earnings and Revenue Growth January 14th 2023
Investors should note that institutions actually own more than half the company, so they can collectively wield significant power. It looks like hedge funds own 11% of Cairn Homes shares. That's interesting, because hedge funds can be quite active and activist. Many look for medium term catalysts that will drive the share price higher. Looking at our data, we can see that the largest shareholder is Lansdowne Partners Limited with 11% of shares outstanding. Meanwhile, the second and third largest shareholders, hold 10% and 8.1%, of the shares outstanding, respectively. Additionally, the company's CEO Michael Stanley directly holds 3.2% of the total shares outstanding.
We also observed that the top 8 shareholders account for more than half of the share register, with a few smaller shareholders to balance the interests of the larger ones to a certain extent.
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. There are a reasonable number of analysts covering the stock, so it might be useful to find out their aggregate view on the future.
Insider Ownership Of Cairn Homes
While the precise definition of an insider can be subjective, almost everyone considers board members to be insiders. 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 most recent data indicates that insiders own some shares in Cairn Homes plc. It has a market capitalization of just UK£597m, and insiders have UK£40m worth of shares, in their own names. It is good to see some investment by insiders, but it might be worth checking if those insiders have been buying.
General Public Ownership
The general public, who are usually individual investors, hold a 25% stake in Cairn Homes. 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
Our data indicates that Private Companies hold 3.1%, of the company's shares. Private companies may be related parties. Sometimes insiders have an interest in a public company through a holding in a private company, rather than in their own capacity as an individual. While it's hard to draw any broad stroke conclusions, it is worth noting as an area for further research.
Next Steps:
While it is well worth considering the different groups that own a company, there are other factors that are even more important. Consider for instance, the ever-present spectre of investment risk. We've identified 2 warning signs with Cairn Homes , and understanding them should be part of your investment process.
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.
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