Every investor in Quincaillerie Richelieu Ltée (TSE: RCH) should know the most powerful shareholder groups. Institutions often own shares in larger companies, and we expect to see insiders owning a noticeable percentage of smaller ones. I like to see at least a little insider ownership. As Charlie Munger said “Show me the incentive and I’ll show you the result”.
Richelieu Hardware has a market capitalization of C$2.2 billion, so we expect some institutional investors to have taken notice of the stock. In the chart below, we can see that institutional investors have bought the company. Let’s take a closer look at what the different types of shareholders can tell us about Quincaillerie Richelieu.
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What does institutional ownership tell us about Richelieu hardware?
Institutions typically measure themselves against a benchmark when reporting to their own investors, so they often become more enthusiastic about a stock once it is included in a major index. We would expect most companies to have some institutions listed, especially if they are growing.
Quincaillerie Richelieu already has institutions registered in the share register. Indeed, they hold a respectable stake in the company. This suggests some credibility with professional investors. But we cannot rely solely on this fact since institutions sometimes make bad investments, like everyone else. 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 Richelieu Hardware’s historic earnings and revenue below, but keep in mind there’s always more to tell.
Hedge funds don’t have a lot of shares in Richelieu Hardware. Looking at our data, we can see that the major shareholder is Mawer Investment Management Ltd. with 12% of the shares outstanding. Meanwhile, the second and third largest shareholders hold 7.5% and 6.8% of the outstanding shares respectively. Richard Lord, who is the second largest shareholder, also holds the title of managing director.
After digging a little deeper, we found that the top 25 held combined ownership of 50% of the company, suggesting that no single shareholder has significant control over the company.
While it makes sense to study data on a company’s institutional ownership, it also makes sense to study analyst sentiment to find out which way the wind is blowing. There are a reasonable number of analysts covering the stock, so it might be useful to know their overall view on the future.
Insider Ownership of Richelieu Hardware
The definition of an insider may differ slightly from country to country, but board members still matter. The management of the company runs the company, but the CEO will answer to the board of directors, even if he is a member of it.
Insider ownership is positive when it signals that executives think like the true owners of the company. However, strong insider ownership can also give immense power to a small group within the company. This can be negative in certain circumstances.
Shareholders would probably be interested to learn that insiders hold shares of Quincaillerie Richelieu Ltée. This is a pretty big company, so it’s generally positive to see a potentially significant alignment. In this case, they own about C$170 million worth of stock (at today’s prices). Most would say this shows the alignment of interests between shareholders and the board. Still, it might be worth checking to see if these insiders have sold.
General public property
With a 46% stake, the general public, made up mostly of individual investors, has a certain hold on Richelieu Hardware. 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.
While it is worth considering the different groups that own a business, there are other, even more important factors. For example, we have identified 2 warning signs for Richelieu Hardware of which you should be aware.
Ultimately the future is the most important. You can access this free analyst forecast report for the company.
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.
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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.