The big shareholder groups in Linamar Corporation (TSE:LNR) have power over the company. Insiders often own a large chunk of younger, smaller, companies while huge companies tend to have institutions as shareholders. I quite like to see at least a little bit of insider ownership. As Charlie Munger said ‘Show me the incentive and I will show you the outcome.
Linamar has a market capitalization of CA$5.0b, so it’s too big to fly under the radar. We’d expect to see both institutions and retail investors owning a portion of the company. Our analysis of the ownership of the company, below, shows that institutions are noticeable on the share registry. We can zoom in on the different ownership groups, to learn more about Linamar.
Check out our latest analysis for Linamar
What Does The Institutional Ownership Tell Us About Linamar?
Many institutions measure their performance against an index that approximates the local market. So they usually pay more attention to companies that are included in major indices.
As you can see, institutional investors have a fair amount of stake in Linamar. 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 Linamar’s historic earnings and revenue below, but keep in mind there’s always more to the story.
Linamar is not owned by hedge funds. Because actions speak louder than words, we consider it a good sign when insiders own a significant stake in a company. In Linamar’s case, its Top Key Executive, Frank Hasenfratz, is the largest shareholder, holding 24% of shares outstanding. In comparison, the second and third largest shareholders hold about 11% and 9.6% of the stock. In addition, we found that Linda Hasenfratz, the CEO has 7.0% of the shares allocated to their name.
Our research also brought to light the fact that roughly 51% of the company is controlled by the top 4 shareholders suggesting that these owners wield significant influence on the business.
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 Linamar
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 a reasonable proportion of Linamar Corporation. It is very interesting to see that insiders have a meaningful CA$1.6b stake in this CA$5.0b business. Most would say this shows a good degree of alignment with shareholders, especially in a company of this size. You can click here to see if those insiders have been buying or selling.
General Public Ownership
The general public holds a 30% stake in Linamar. While this group can’t necessarily call the shots, it can certainly have a real influence on how the company is run.
Next Steps:
It’s always worth thinking about the different groups who own shares in a company. But to understand Linamar better, we need to consider many other factors. Take risks for example – Linamar has 2 warning signs (and 1 which is a bit unpleasant) we think you should know about.
If you would prefer discover what analysts are predicting in terms of future growth, do not miss this free report 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.
This article by Simply Wall St is general in nature. 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.
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