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Significantly high institutional ownership implies Magna International’s stock price is sensitive to their trading actions
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The top 19 shareholders own 50% of the company
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Ownership research along with analyst forecasts data help provide a good understanding of opportunities in a stock
To get a sense of who is truly in control of Magna International Inc. (TSE:MG), it is important to understand the ownership structure of the business. And the group that holds the biggest piece of the pie are institutions with 81% ownership. Put another way, the group faces the maximum upside potential (or downside risk).
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 Magna International.
See our latest analysis for Magna International
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 Magna International does have institutional investors; and they hold a good portion of the company’s stock. 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 Magna International’s historic earnings and revenue below, but keep in mind there’s always more to the story.
Institutional investors own over 50% of the company, so together than can probably strongly influence board decisions. Magna International is not owned by hedge funds. Pzena Investment Management, Inc. is currently the company’s largest shareholder with 10% of shares outstanding. For context, the second largest shareholder holds about 5.0% of the shares outstanding, followed by an ownership of 4.5% by the third-largest shareholder.
Looking at the shareholder registry, we can see that 50% of the ownership is controlled by the top 19 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. Quite a few analysts cover the stock, so you could look into forecast growth quite easily.
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.
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 data suggests that insiders own under 1% of Magna International Inc. in their own names. Being so large, we would not expect insiders to own a large proportion of the stock. Collectively, they own CA$25m of stock. In this sort of situation, it can be more interesting to see if those insiders have been buying or selling.
With a 19% ownership, the general public, mostly comprising of individual investors, have some degree of sway over Magna International. While this group can’t necessarily call the shots, it can certainly have a real influence on how the company is run.
While it is well worth considering the different groups that own a company, there are other factors that are even more important.
Many find it useful to take an in depth look at how a company has performed in the past. You can access this detailed graph of past earnings, revenue and cash flow.
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.