Institutional owners may ignore Reliance, Inc.'s (NYSE:RS) recent US$551m market cap decline as longer-term profits stay in the green
In This Article:
Key Insights
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Given the large stake in the stock by institutions, Reliance's stock price might be vulnerable to their trading decisions
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51% of the business is held by the top 13 shareholders
If you want to know who really controls Reliance, Inc. (NYSE:RS), then you'll have to look at the makeup of its share registry. We can see that institutions own the lion's share in the company with 84% ownership. In other words, the group stands to gain the most (or lose the most) from their investment into the company.
Institutional investors endured the highest losses after the company's market cap fell by US$551m last week. However, the 15% one-year return to shareholders may have helped lessen their pain. But they would probably be wary of future losses.
Let's take a closer look to see what the different types of shareholders can tell us about Reliance.
See our latest analysis for Reliance
What Does The Institutional Ownership Tell Us About Reliance?
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.
Reliance already has institutions on the share registry. Indeed, they own a respectable stake in the company. 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 Reliance's historic earnings and revenue below, but keep in mind there's always more to the story.
Since institutional investors own more than half the issued stock, the board will likely have to pay attention to their preferences. We note that hedge funds don't have a meaningful investment in Reliance. The company's largest shareholder is The Vanguard Group, Inc., with ownership of 12%. For context, the second largest shareholder holds about 12% of the shares outstanding, followed by an ownership of 7.2% by the third-largest shareholder.
A closer look at our ownership figures suggests that the top 13 shareholders have a combined ownership of 51% implying that no single shareholder has a majority.
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. Quite a few analysts cover the stock, so you could look into forecast growth quite easily.