With 57% ownership, Sims Limited (ASX:SGM) enjoys strong institutional support
To get an idea of who really controls Sims Limited (ASX:SGM), it is important to understand the ownership structure of the company. The group holding the largest number of company shares, around 57% to be precise, are institutions. In other words, the group faces the maximum upside potential (or downside risk).
Since institutional owners have a huge pool of resources and liquidity, their investment decisions tend to carry a lot of weight, especially with individual investors. Therefore, having a considerable amount of institutional money invested in a business is often considered a desirable trait.
Let’s dive deeper into each Sims owner type, starting with the table below.
See our latest analysis for The Sims
What does institutional ownership tell us about The Sims?
Institutional investors typically compare their own returns to the returns of a commonly tracked index. They therefore generally consider buying larger companies that are included in the relevant benchmark.
Sims already has institutions on the stock register. Indeed, they hold a respectable stake in the company. This may indicate that the company has some degree of credibility in the investment community. However, it is best to be wary of relying on the so-called validation that accompanies institutional investors. They are also sometimes wrong. When multiple institutions hold a stock, there is always a risk that they are in a “crowded trade”. When such a transaction goes wrong, multiple parties may compete to quickly sell shares. This risk is higher in a company with no history of growth. You can see Sims historical earnings and income below, but keep in mind there’s always more to the story.
Investors should note that institutions actually own more than half of the company, so they can collectively wield significant power. We note that hedge funds have no significant investment in The Sims. The company’s largest shareholder is Mitsui & Co., Ltd., with an 18% stake. Orbis Investment Management Limited is the second largest shareholder with 18% of the ordinary shares and Allan Gray Limited owns approximately 8.7% of the shares of the company.
To make our study more interesting, we found that the top 5 shareholders control more than half of the company, which implies that this group has a considerable influence on the decision-making of the company.
Institutional ownership research is a good way to assess and filter the expected performance of a stock. The same can be obtained by studying the feelings of the analyst. There are a reasonable number of analysts covering the stock, so it might be useful to know their overall view on the future.
Sims Insider Property
The definition of company insiders can be subjective and varies from jurisdiction to jurisdiction. Our data reflects individual insiders, capturing at least board members. Management is ultimately responsible to the board of directors. However, it is not uncommon for managers to be members of the management board, especially if they are founders or CEOs.
Most view insider ownership as a positive because it can indicate that the board is well aligned with other shareholders. However, there are times when too much power is concentrated within this group.
Shareholders would probably be interested to learn that insiders hold shares of Sims Limited. It’s a pretty big company, so it’s generally a positive to see a potentially meaningful alignment. In this case, they hold approximately A$96 million worth of shares (at current prices). If you want to explore the issue of insider alignment, you can click here to see if insiders have been buying or selling.
General public property
The general public, who are usually individual investors, own a 10% stake in Sims. This size of ownership, although considerable, may not be sufficient to change company policy if the decision is not in line with other major shareholders.
Private Company Ownership
We can see that private companies hold 4.9% of the shares issued. It’s hard to draw conclusions from this fact alone, so it’s worth investigating who owns these private companies. Sometimes insiders or other related parties have an interest in shares of a public company through a separate private company.
Ownership of a public company
Public companies currently hold 24% of Sims shares. It’s hard to say for sure, but it suggests they have intertwined business interests. This could be a strategic stake, so it’s worth monitoring this space for ownership changes.
I find it very interesting to see who exactly owns a company. But to really get insight, we also need to consider other information. For example, we found 2 warning signs for Sims (1 is potentially serious!) which you should be aware of before investing here.
But finally it’s the future, not the past, which will determine the performance of the owners of this company. Therefore, we think it’s advisable to take a look at this free report showing whether analysts are predicting a brighter future.
NB: The figures in this article are calculated using trailing twelve month data, which refers to the 12 month period ending on the last day of the month the financial statements are dated. This may not be consistent with the annual report figures for the full year.
Feedback on this article? Concerned about content? Get in touch with us directly. You can also email the editorial team (at) Simplywallst.com.
This Simply Wall St article is general in nature. We provide commentary based on historical data and analyst forecasts only using unbiased methodology and our articles are not intended to be financial advice. It is not a recommendation to buy or sell stocks and does not take into account your objectives or financial situation. Our goal is to bring you targeted long-term analysis based on fundamental data. Note that our analysis may not take into account the latest announcements from price-sensitive companies or qualitative materials. Simply Wall St has no position in the stocks mentioned.
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