Following the recent £130m drop in Travis Perkins plc’s (LON:TPK) market cap, institutional owners may be forced to take tough action

If you want to know who really controls Travis Perkins plc (LON:TPK), you need to look at the composition of the share register. We can see that institutions own the lion’s share of the company at 88%. In other words, the group is exposed to maximum upside (or downside risk).

As a result, institutional investors suffered their heaviest losses last week after the market cap fell by £130m. The recent loss, which adds to a 36% one-year loss for shareholders, may not sit well with this group of investors. Institutions, often referred to as “market makers,” wield significant power in influencing the price momentum of any stock. Therefore, if the decline continues, institutional investors could be pressured to sell Travis Perkins, which could hurt individual investors.

In the graphic below, we zoom in on the different ownership groups of Travis Perkins.

Check out our latest analysis for Travis Perkins

LSE:TPK ownership breakdown June 21, 2022

What does institutional ownership tell us about Travis Perkins?

Institutional investors typically compare their own returns to the returns of a commonly tracked index. As such, they typically consider buying larger companies that are included in the relevant benchmark index.

We can see that Travis Perkins has institutional investors; and they hold a good portion of the company’s stock. This may indicate that the company has a certain level of credibility in the investor community. However, it’s best not to rely on the supposed confirmation that comes from institutional investors. They too are sometimes wrong. If several institutes change their opinion on a stock at the same time, the share price could fall quickly. It is therefore worth checking out Travis Perkins’ winning history below. Of course, what really matters is the future.

Profit and Revenue Growth
LSE:TPK Earnings and Revenue Growth Jun 21, 2022

Investors should note that institutions actually own more than half of the company, so collectively they can wield significant power. Travis Perkins does not own hedge funds. Looking at our data, we can see that the largest shareholder is Pzena Investment Management, Inc with 9.0% of the shares outstanding. Sprucegrove Investment Management Ltd and BlackRock, Inc. are the second and third largest shareholders with 5.0% and 4.7% of the outstanding shares, respectively.

If we look at the register of shareholders, we can see that 51% of ownership is controlled by the 13 largest shareholders, meaning that no single shareholder has a controlling interest in the property.

Studying institutional ownership is a good way to gauge and filter a stock’s expected performance. The same can be done by studying analyst sentiment. There are a fair number of analysts covering the stock, so it might be helpful to get their overall view on the future.

Insider ownership by Travis Perkins

The definition of corporate insider can be subjective and varies by jurisdiction. Our data reflects individual insiders and captures at least board members. Management ultimately reports to the board of directors. However, it is not uncommon for managers to be board members, especially if they are founders or CEOs.

Most view insider ownership as a positive, as it can indicate that the board is well aligned with other shareholders. In some cases, however, too much power is concentrated within this group.

Our data suggests that insiders own less than 1% of Travis Perkins plc in their own name. It’s a big company, so even a small proportional stake can create alignment between the board and shareholders. In this case, insiders own shares worth £3.4m. It’s good to see board members own shares, but it might be worth checking to see if those insiders bought.

General Public Property

The general public — including retail investors — own a 10% stake in the company, so it can’t be ignored. While this ownership size is substantial, it may not be enough to change company policy if the decision is not aligned with other major shareholders.

Next Steps:

It’s always worth thinking about the different groups that own shares in a company. But to better understand Travis Perkins, we need to consider many other factors. Take risks, for example – Travis Perkins did 2 warning signs We think you should be aware of this.

If you’re like me, you might want to think about whether this company is going to grow or shrink. Luckily, you can check out this free report that includes analyst forecasts for the future.

Note: The figures in this article are calculated using data for the last twelve months, relating to the 12-month period ending on the last date of the month to which the financial statements are dated. This may not tally with the annual report figures for the full year.

This Simply Wall St article is of a general nature. We provide comments based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended as financial advice. It is not a recommendation to buy or sell any stock and does not take into account your goals or financial situation. Our goal is to offer you long-term focused analysis based on fundamental data. Note that our analysis may not take into account the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any of the stocks mentioned.

About Nina Snider

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