Significantly high institutional ownership implies Rolls-Royce Holdings' stock price is sensitive to their trading actions
50% of the business is held by the top 22 shareholders
Analyst forecasts along with ownership data serve to give a strong idea about prospects for a business
Every investor in Rolls-Royce Holdings plc (LON:RR.) should be aware of the most powerful shareholder groups. We can see that institutions own the lion's share in the company with 78% ownership. That is, the group stands to benefit the most if the stock rises (or lose the most if there is a downturn).
Given the vast amount of money and research capacities at their disposal, institutional ownership tends to carry a lot of weight, especially with individual investors. As a result, a sizeable amount of institutional money invested in a firm is generally viewed as a positive attribute.
Let's take a closer look to see what the different types of shareholders can tell us about Rolls-Royce Holdings.
What Does The Institutional Ownership Tell Us About Rolls-Royce Holdings?
Institutions typically measure themselves against a benchmark when reporting to their own investors, so they often become more enthusiastic about a stock once it's included in a major index. We would expect most companies to have some institutions on the register, especially if they are growing.
As you can see, institutional investors have a fair amount of stake in Rolls-Royce Holdings. 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 Rolls-Royce Holdings' historic earnings and revenue below, but keep in mind there's always more to the story.
LSE:RR. Earnings and Revenue Growth January 9th 2025
Investors should note that institutions actually own more than half the company, so they can collectively wield significant power. Hedge funds don't have many shares in Rolls-Royce Holdings. Looking at our data, we can see that the largest shareholder is Capital Research and Management Company with 7.7% of shares outstanding. In comparison, the second and third largest shareholders hold about 7.2% and 4.7% of the stock.
Looking at the shareholder registry, we can see that 50% of the ownership is controlled by the top 22 shareholders, meaning that no single shareholder has a majority interest in the ownership.
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 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 Rolls-Royce Holdings
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.
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 less than 1% of Rolls-Royce Holdings plc. Being so large, we would not expect insiders to own a large proportion of the stock. Collectively, they own UK£8.4m of stock. 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
With a 20% ownership, the general public, mostly comprising of individual investors, have some degree of sway over Rolls-Royce Holdings. 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:
While it is well worth considering the different groups that own a company, there are other factors that are even more important. Like risks, for instance. Every company has them, and we've spotted 3 warning signs for Rolls-Royce Holdings (of which 2 are significant!) you should know about.
If you would prefer discover what analysts are predicting in terms of future growth, do not miss this freereport on analyst forecasts.
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.
