Key Insights
- Institutions' substantial holdings in Tredegar implies that they have significant influence over the company's share price
- 52% of the business is held by the top 6 shareholders
- Past performance of a company along with ownership data serve to give a strong idea about prospects for a business
To get a sense of who is truly in control of Tredegar Corporation (NYSE:TG), it is important to understand the ownership structure of the business. With 67% stake, institutions possess the maximum shares in the company. Put another way, the group faces the maximum upside potential (or downside risk).
No shareholder likes losing money on their investments, especially institutional investors who saw their holdings drop 12% in value last week. However, the 5.4% one-year return to shareholders might have softened the blow. We would assume however, that they would be on the lookout for weakness in the future.
In the chart below, we zoom in on the different ownership groups of Tredegar.
See our latest analysis for Tredegar
What Does The Institutional Ownership Tell Us About Tredegar?
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.
Tredegar 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. 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 Tredegar, (below). Of course, keep in mind that there are other factors to consider, too.
Since institutional investors own more than half the issued stock, the board will likely have to pay attention to their preferences. Hedge funds don't have many shares in Tredegar. The company's largest shareholder is GAMCO Investors, Inc., with ownership of 20%. With 8.5% and 7.9% of the shares outstanding respectively, Bank of America Corporation, Asset Management Arm and BlackRock, Inc. are the second and third largest shareholders. Furthermore, CEO John Steitz is the owner of 0.9% of the company's shares.
We did some more digging and found that 6 of the top shareholders account for roughly 52% of the register, implying that along with larger shareholders, there are a few smaller shareholders, thereby balancing out each others interests somewhat.
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. As far as we can tell there isn't analyst coverage of the company, so it is probably flying under the radar.
Insider Ownership Of Tredegar
While the precise definition of an insider can be subjective, almost everyone considers board members to be insiders. Company management run the business, but the CEO will answer to the board, even if he or she is a member of it.
Insider ownership is positive when it signals leadership are thinking like the true owners of the company. However, high insider ownership can also give immense power to a small group within the company. This can be negative in some circumstances.
Our most recent data indicates that insiders own some shares in Tredegar Corporation. In their own names, insiders own US$7.5m worth of stock in the US$230m 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
With a 23% ownership, the general public, mostly comprising of individual investors, have some degree of sway over Tredegar. 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.
Private Company Ownership
We can see that Private Companies own 7.1%, 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.
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. Like risks, for instance. Every company has them, and we've spotted 2 warning signs for Tredegar (of which 1 doesn't sit too well with us!) you should know about.
Of course this may not be the best stock to buy. Therefore, you may wish to see our free collection of interesting prospects boasting favorable financials.
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.