A look at the shareholders of Saudi Real Estate Company (TADAWUL:4020) can tell us which group is most powerful. Institutions will often hold stock in bigger companies, and we expect to see insiders owning a noticeable percentage of the smaller ones. We also tend to see lower insider ownership in companies that were previously publicly owned.
With a market capitalization of ر.س3.2b, Saudi Real Estate is a decent size, so it is probably on the radar of institutional investors. Taking a look at our data on the ownership groups (below), it’s seems that institutions own shares in the company. Let’s take a closer look to see what the different types of shareholder can tell us about Saudi Real Estate.
What Does The Institutional Ownership Tell Us About Saudi Real Estate?
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 Saudi Real Estate does have institutional investors; and they hold 7.5% of the 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. 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 Saudi Real Estate’s historic earnings and revenue, below, but keep in mind there’s always more to the story.
We note that hedge funds don’t have a meaningful investment in Saudi Real Estate. Public Investments Fund is currently the largest shareholder, with 65% of shares outstanding. With such a huge stake in the ownership, we infer that they have significant control of the future of the company. Next, we have Public Pension Agency and The Vanguard Group, Inc. as the second and third largest shareholders, holding 5.9% and 1.1%, of the shares outstanding, respectively.
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. As far I can tell there isn’t analyst coverage of the company, so it is probably flying under the radar.
Insider Ownership Of Saudi Real Estate
The definition of an insider can differ slightly between different countries, but members of the board of directors always count. Company management run the business, but the CEO will answer to the board, even if he or she is a member of it.
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 information suggests that Saudi Real Estate Company insiders own under 1% of the company. It appears that the board holds about ر.س1.5m worth of stock. This compares to a market capitalization of ر.س3.2b. Many investors in smaller companies prefer to see the board more heavily invested. You can click here to see if those insiders have been buying or selling.
General Public Ownership
With a 28% ownership, the general public have some degree of sway over 4020. This size of ownership, while considerable, may not be enough to change company policy if the decision is not in sync with other large shareholders.
While it is well worth considering the different groups that own a company, there are other factors that are even more important. Like risks, for instance. Every company has them, and we’ve spotted 3 warning signs for Saudi Real Estate (of which 2 are concerning!) you should know about.
If you would prefer check out another company — one with potentially superior financials — then do not miss this free list of interesting companies, backed by strong financial data.
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.
If you spot an error that warrants correction, please contact the editor at firstname.lastname@example.org. 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. Simply Wall St has no position in the stocks mentioned.
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