Significantly high institutional ownership implies James Hardie Industries' stock price is sensitive to their trading actions
50% of the business is held by the top 10 shareholders
Ownership research along with analyst forecasts data help provide a good understanding of opportunities in a stock
Every investor in James Hardie Industries plc (ASX:JHX) should be aware of the most powerful shareholder groups. With 64% stake, institutions possess the maximum shares in the company. That is, the group stands to benefit the most if the stock rises (or lose the most if there is a downturn).
Last week's AU$698m market cap gain would probably be appreciated by institutional investors, especially after a year of 22% losses.
Let's delve deeper into each type of owner of James Hardie Industries, beginning with the chart below.
What Does The Institutional Ownership Tell Us About James Hardie Industries?
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.
We can see that James Hardie Industries 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. 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 James Hardie Industries, (below). Of course, keep in mind that there are other factors to consider, too.
ASX:JHX Earnings and Revenue Growth March 30th 2023
Investors should note that institutions actually own more than half the company, so they can collectively wield significant power. We note that hedge funds don't have a meaningful investment in James Hardie Industries. Looking at our data, we can see that the largest shareholder is AustralianSuper Pty. Ltd. with 7.2% of shares outstanding. Meanwhile, the second and third largest shareholders, hold 6.4% and 5.3%, of the shares outstanding, respectively.
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 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 James Hardie Industries
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. 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 James Hardie Industries 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 AU$35m of stock. Arguably recent buying and selling is just as important to consider. You can click here to see if insiders have been buying or selling.
General Public Ownership
The general public, who are usually individual investors, hold a 35% stake in James Hardie Industries. While this group can't necessarily call the shots, it can certainly have a real influence on how the company is run.
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.
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