Every investor in Contact Energy Limited (NZSE:CEN) should be aware of the most powerful shareholder groups. We can see that retail investors own the lion's share in the company with 57% ownership. That is, the group stands to benefit the most if the stock rises (or lose the most if there is a downturn).
Following a 3.2% increase in the stock price last week, retail investors profited the most, but institutions who own 42% stock also stood to gain from the increase.
In the chart below, we zoom in on the different ownership groups of Contact Energy.
What Does The Institutional Ownership Tell Us About Contact Energy?
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.
As you can see, institutional investors have a fair amount of stake in Contact Energy. 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 Contact Energy's historic earnings and revenue below, but keep in mind there's always more to the story.
NZSE:CEN Earnings and Revenue Growth October 6th 2024
Contact Energy is not owned by hedge funds. The company's largest shareholder is BlackRock, Inc., with ownership of 6.1%. For context, the second largest shareholder holds about 6.0% of the shares outstanding, followed by an ownership of 4.8% by the third-largest shareholder.
Our studies suggest that the top 25 shareholders collectively control less than half of the company's shares, meaning that the company's shares are widely disseminated and there is no dominant shareholder.
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 Contact Energy
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.
I generally consider insider ownership to be a good thing. However, on some occasions it makes it more difficult for other shareholders to hold the board accountable for decisions.
Our information suggests that Contact Energy Limited insiders own under 1% of the company. 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 NZ$49m worth of shares (at current prices). It is always good to see at least some insider ownership, but it might be worth checking if those insiders have been selling.
General Public Ownership
The general public, mostly comprising of individual investors, collectively holds 57% of Contact Energy shares. This size of ownership gives investors from the general public some collective power. They can and probably do influence decisions on executive compensation, dividend policies and proposed business acquisitions.
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. Case in point: We've spotted 1 warning sign for Contact Energy you should be aware of.
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.
