Given the large stake in the stock by institutions, West African Resources' stock price might be vulnerable to their trading decisions
A total of 10 investors have a majority stake in the company with 52% ownership
Analyst forecasts along with ownership data serve to give a strong idea about prospects for a business
A look at the shareholders of West African Resources Limited (ASX:WAF) can tell us which group is most powerful. The group holding the most number of shares in the company, around 60% to be precise, is institutions. 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. Hence, having a considerable amount of institutional money invested in a company is often regarded as a desirable trait.
Let's take a closer look to see what the different types of shareholders can tell us about West African Resources.
What Does The Institutional Ownership Tell Us About West African Resources?
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.
West African Resources already has institutions on the share registry. Indeed, they own a respectable stake in the company. 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. It is not uncommon to see a big share price drop if two large institutional investors try to sell out of a stock at the same time. So it is worth checking the past earnings trajectory of West African Resources, (below). Of course, keep in mind that there are other factors to consider, too.
earnings-and-revenue-growth
Investors should note that institutions actually own more than half the company, so they can collectively wield significant power. It would appear that 5.5% of West African Resources shares are controlled by hedge funds. That catches my attention because hedge funds sometimes try to influence management, or bring about changes that will create near term value for shareholders. Van Eck Associates Corporation is currently the largest shareholder, with 12% of shares outstanding. Meanwhile, the second and third largest shareholders, hold 6.4% and 5.5%, of the shares outstanding, respectively. Furthermore, CEO Richard Hyde is the owner of 1.7% of the company's shares.
On further inspection, we found that more than half the company's shares are owned by the top 10 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. 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 West African Resources
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. 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.
We can report that insiders do own shares in West African Resources Limited. As individuals, the insiders collectively own AU$49m worth of the AU$816m company. 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 West African Resources. 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:
It's always worth thinking about the different groups who own shares in a company. But to understand West African Resources better, we need to consider many other factors. Case in point: We've spotted 1 warning sign for West African Resources 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.
