Steel

In the wake of Schnitzer Steel Industries, Inc.’s (NASDAQ:RDUS) latest US$57m market cap drop, institutional owners may be forced to take severe actions

Key Insights

  • Significantly high institutional ownership implies Schnitzer Steel Industries’ stock price is sensitive to their trading actions
  • A total of 10 investors have a majority stake in the company with 51% ownership
  • Insiders have sold recently

Every investor in Schnitzer Steel Industries, Inc. (NASDAQ:RDUS) should be aware of the most powerful shareholder groups. We can see that institutions own the lion’s share in the company with 82% ownership. Put another way, the group faces the maximum upside potential (or downside risk).

And institutional investors endured the highest losses after the company’s share price fell by 6.5% last week. The recent loss, which adds to a one-year loss of 1.5% for stockholders, may not sit well with this group of investors. Also referred to as “smart money”, institutions have a lot of sway over how a stock’s price moves. As a result, if the downtrend continues, institutions may face pressures to sell Schnitzer Steel Industries, which might have negative implications on individual investors.

In the chart below, we zoom in on the different ownership groups of Schnitzer Steel Industries.

Check out our latest analysis for Schnitzer Steel Industries

NasdaqGS:RDUS Ownership Breakdown January 4th 2024

What Does The Institutional Ownership Tell Us About Schnitzer Steel Industries?

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 Schnitzer Steel Industries does have institutional investors; and they hold a good portion of the company’s stock. 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. It is not uncommon to see a big share price drop if two large institutional investors try to sell out of a stock at the same time. So it is worth checking the past earnings trajectory of Schnitzer Steel Industries, (below). Of course, keep in mind that there are other factors to consider, too.

NasdaqGS:RDUS Earnings and Revenue Growth January 4th 2024

Investors should note that institutions actually own more than half the company, so they can collectively wield significant power. Schnitzer Steel Industries is not owned by hedge funds. Our data shows that BlackRock, Inc. is the largest shareholder with 12% of shares outstanding. The Vanguard Group, Inc. is the second largest shareholder owning 9.4% of common stock, and Dimensional Fund Advisors LP holds about 8.0% of the company stock. In addition, we found that Tamara Lundgren, the CEO has 3.6% of the shares allocated to their name.

On further inspection, we found that more than half the company’s shares are owned by the top 10 shareholders, suggesting that the interests of the larger shareholders are balanced out to an extent by the smaller ones.

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. There is a little analyst coverage of the stock, but not much. So there is room for it to gain more coverage.

Insider Ownership Of Schnitzer Steel Industries

The definition of an insider can differ slightly between different countries, but members of the board of directors always count. 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.

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.

Shareholders would probably be interested to learn that insiders own shares in Schnitzer Steel Industries, Inc.. In their own names, insiders own US$46m worth of stock in the US$822m company. It is good to see some investment by insiders, but it might be worth checking if those insiders have been buying.

General Public Ownership

With a 13% ownership, the general public, mostly comprising of individual investors, have some degree of sway over Schnitzer Steel Industries. 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 Schnitzer Steel Industries better, we need to consider many other factors. Consider for instance, the ever-present spectre of investment risk. We’ve identified 2 warning signs with Schnitzer Steel Industries (at least 1 which is a bit unpleasant) , and understanding them should be part of your investment process.

If you would prefer discover what analysts are predicting in terms of future growth, do not miss this free report on analyst forecasts.

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.

Valuation is complex, but we’re helping make it simple.

Find out whether Schnitzer Steel Industries is potentially over or undervalued by checking out our comprehensive analysis, which includes fair value estimates, risks and warnings, dividends, insider transactions and financial health.

View the Free Analysis

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.


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