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The meaning of Gold Fields' ownership structure - SimplyWallStreet

Friday, 15 May 2020

Every investor in Gold Fields Limited (JSE:GFI) should be aware of the most powerful shareholder groups. Institutions will often hold stock in bigger companies, and we expect to see insiders owning a noticeable percentage of the smaller ones. Companies that have been privatized tend to have low insider ownership.

With a market capitalization of SAR133b, Gold Fields is rather large. We'd expect to see institutional investors on the register. Companies of this size are usually well known to retail investors, too. Taking a look at our data on the ownership groups (below), it's seems that institutions are noticeable on the share registry. We can zoom in on the different ownership groups, to learn more about Gold Fields.

What Does The Institutional Ownership Tell Us About Gold Fields?

Many institutions measure their performance against an index that approximates the local market. So they usually pay more attention to companies that are included in major indices.

As you can see, institutional investors own 84% of Gold Fields. 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 Gold Fields, (below). Of course, keep in mind that there are other factors to consider, too.

Investors should note that institutions actually own more than half the company, so they can collectively wield significant power. We note that hedge funds don't have a meaningful investment in Gold Fields. Looking at our data, we can see that the largest shareholder is Van Eck Associates Corporation with 10% of shares outstanding. Next, we have Dimensional Fund Advisors L.P. and Donald Smith & Co., Inc. as the second and third largest shareholders, holding 9.4% and 7.4%, of the shares outstanding, respectively.

On further inspection, we found that 51% of the share register is 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 are a reasonable number of analysts covering the stock, so it might be useful to find out their aggregate view on the future.

Insider Ownership Of Gold Fields

While the precise definition of an insider can be subjective, almost everyone considers board members to be insiders. 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 most recent data indicates that insiders own less than 1% of Gold Fields Limited. It's a big company, so even a small proportional interest can create alignment between the board and shareholders. In this case insiders own SAR203m worth of shares. It is always good to see at least some insider ownership, but it might be worth checking if those insiders have been selling.

General Public Ownership

The general public, with a 13% stake in the company, will not easily be ignored. While this group can't necessarily call the shots, it can certainly have a real influence on how the company is run.

Next Steps:

It's always worth thinking about the different groups who own shares in a company. But to understand Gold Fields better, we need to consider many other factors. For instance, we've identified 4 warning signs for Gold Fields that you should be aware of.

But ultimately it is the future, not the past, that will determine how well the owners of this business will do. Therefore we think it advisable to take a look at this free report showing whether analysts are predicting a brighter future.


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