Institutional investors may adopt severe steps after Tredegar Corporation's (NYSE:TG) latest 11% drop adds to a year losses
Key Insights
- Significantly high institutional ownership implies Tredegar's stock price is sensitive to their trading actions
- The top 6 shareholders own 51% of the company
- Insiders have been selling lately
Every investor in Tredegar Corporation (NYSE:TG) should be aware of the most powerful shareholder groups. We can see that institutions own the lion's share in the company with 67% ownership. In other words, the group stands to gain the most (or lose the most) from their investment into the company.
And so it follows that institutional investors was the group most impacted after the company's market cap fell to US$236m last week after a 11% drop in the share price. This set of investors may especially be concerned about the current loss, which adds to a one-year loss of 20% for shareholders. Often called “market movers", institutions wield significant power in influencing the price dynamics of any stock. As a result, if the decline continues, institutional investors may be pressured to sell Tredegar which might hurt individual investors.
Let's take a closer look to see what the different types of shareholders can tell us about Tredegar.
See our latest analysis for Tredegar
What Does The Institutional Ownership Tell Us About Tredegar?
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 Tredegar 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. 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 Tredegar's historic earnings and revenue below, but keep in mind there's always more to the story.
Investors should note that institutions actually own more than half the company, so they can collectively wield significant power. Tredegar is not owned by hedge funds. Looking at our data, we can see that the largest shareholder is GAMCO Investors, Inc. with 21% of shares outstanding. For context, the second largest shareholder holds about 8.3% of the shares outstanding, followed by an ownership of 7.1% by the third-largest shareholder. In addition, we found that John Steitz, the CEO has 0.8% of the shares allocated to their name.
We did some more digging and found that 6 of the top shareholders account for roughly 51% of the register, implying that along with larger shareholders, there are a few smaller shareholders, thereby balancing out each others interests somewhat.
While it makes sense to study institutional ownership data for a company, it also makes sense to study analyst sentiments to know which way the wind is blowing. As far as we can tell there isn't analyst coverage of the company, so it is probably flying under the radar.
Insider Ownership Of Tredegar
While the precise definition of an insider can be subjective, almost everyone considers board members to be insiders. The company management answer to the board and the latter should represent the interests of shareholders. Notably, sometimes top-level managers are on the board themselves.
Insider ownership is positive when it signals leadership are thinking like the true owners of the company. However, high insider ownership can also give immense power to a small group within the company. This can be negative in some circumstances.
Our most recent data indicates that insiders own a reasonable proportion of Tredegar Corporation. Insiders own US$29m worth of shares in the US$236m company. We would say this shows alignment with shareholders, but it is worth noting that the company is still quite small; some insiders may have founded the business. You can click here to see if those insiders have been buying or selling.
General Public Ownership
The general public-- including retail investors -- own 18% stake in the company, and hence can't easily be ignored. 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.
Next Steps:
It's always worth thinking about the different groups who own shares in a company. But to understand Tredegar better, we need to consider many other factors. Be aware that Tredegar is showing 1 warning sign in our investment analysis , you should know about...
Of course this may not be the best stock to buy. So take a peek at this free free list of interesting companies.
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.