Yahoo Finance With 85% ownership, Compass Group PLC (LON:CPG) boasts of strong institutional backing
Key Insights
Given the large stake in the stock by institutions, Compass Group's stock price might be vulnerable to their trading decisions
48% of the business is held by the top 25 shareholders
Every investor in Compass Group PLC (LON:CPG) should be aware of the most powerful shareholder groups. We can see that institutions own the lion's share in the company with 85% ownership. In other words, the group stands to gain the most (or lose the most) from their investment into the company.
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 delve deeper into each type of owner of Compass Group, beginning with the chart below.
View our latest analysis for Compass Group
What Does The Institutional Ownership Tell Us About Compass Group?
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.
We can see that Compass Group does have institutional investors; and they hold a good portion of the company's stock. This can indicate that the company has a certain degree of credibility in the investment community. However, it is best to be wary of relying on the supposed validation that comes with institutional investors. They too, get it wrong sometimes. If multiple institutions change their view on a stock at the same time, you could see the share price drop fast. It's therefore worth looking at Compass Group's earnings history below. Of course, the future is what really matters.
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 Compass Group. Looking at our data, we can see that the largest shareholder is BlackRock, Inc. with 8.2% of shares outstanding. For context, the second largest shareholder holds about 4.6% of the shares outstanding, followed by an ownership of 4.4% by the third-largest shareholder.
On studying our ownership data, we found that 25 of the top shareholders collectively own less than 50% of the share register, implying that no single individual has a majority interest.
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. 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 Compass Group
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.
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 Compass Group PLC insiders own under 1% of the company. Being so large, we would not expect insiders to own a large proportion of the stock. Collectively, they own UK£13m of stock. It is good to see board members owning shares, but it might be worth checking if those insiders have been buying.
General Public Ownership
With a 15% ownership, the general public, mostly comprising of individual investors, have some degree of sway over Compass Group. While this size of ownership may not be enough to sway a policy decision in their favour, they can still make a collective impact on company policies.
Next Steps:
It's always worth thinking about the different groups who own shares in a company. But to understand Compass Group better, we need to consider many other factors. Consider for instance, the ever-present spectre of investment risk. We've identified 1 warning sign with Compass Group , and understanding them should be part of your investment process.
Ultimately the future is most important. You can access this free report on analyst forecasts for the company.
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.
