Key Insights

• Significantly high institutional ownership implies Radius Recycling's stock price is sensitive to their trading actions
• The top 10 shareholders own 50% of the company
• Insiders have sold recently

A look at the shareholders of Radius Recycling, Inc. (NASDAQ:RDUS) can tell us which group is most powerful. We can see that institutions own the lion's share in the company with 83% ownership. That is, the group stands to benefit the most if the stock rises (or lose the most if there is a downturn).

And so it follows that institutional investors was the group most impacted after the company's market cap fell to US$490m last week after a 9.7% 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 39% for shareholders. Also referred to as "smart money", institutions have a lot of sway over how a stock's price moves. Hence, if weakness in Radius Recycling's share price continues, institutional investors may feel compelled to sell the stock, which might not be ideal for individual investors.

Let's delve deeper into each type of owner of Radius Recycling, beginning with the chart below.

What Does The Institutional Ownership Tell Us About Radius Recycling?

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 have a fair amount of stake in Radius Recycling. 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 Radius Recycling'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. Hedge funds don't have many shares in Radius Recycling. BlackRock, Inc. is currently the company's largest shareholder with 12% of shares outstanding. Columbia Management Investment Advisers, LLC is the second largest shareholder owning 7.6% of common stock, and Dimensional Fund Advisors LP holds about 6.6% of the company stock. Furthermore, CEO Tamara Lundgren is the owner of 3.8% of the company's shares.

We did some more digging and found that 10 of the top shareholders account for roughly 50% of the register, implying that along with larger shareholders, there are a few smaller shareholders, thereby balancing out each others interests somewhat.

Researching institutional ownership is a good way to gauge and filter a stock's expected performance. The same can be achieved by studying analyst sentiments. There is some analyst coverage of the stock, but it could still become more well known, with time.

Insider Ownership Of Radius Recycling

The definition of an insider can differ slightly between different countries, but members of the board of directors always count. Management ultimately answers to the board. However, it is not uncommon for managers to be executive board members, especially if they are a founder or the CEO.

I generally consider insider ownership to be a good thing. However, on some occasions it makes it more difficult for other shareholders to hold the board accountable for decisions.

We can report that insiders do own shares in Radius Recycling, Inc.. It has a market capitalization of just US$490m, and insiders have US$30m worth of shares, in their own names. Some would say this shows alignment of interests between shareholders and the board. But it might be worth checking if those insiders have been selling.

General Public Ownership

With a 10% ownership, the general public, mostly comprising of individual investors, have some degree of sway over Radius Recycling. While this size of ownership may not be enough to sway a policy decision in their favour, they can still make a collective impact on company policies.

Next Steps:

While it is well worth considering the different groups that own a company, there are other factors that are even more important. Take risks for example - Radius Recycling has 4 warning signs (and 3 which are a bit concerning) we think you should know about.

If you are like me, you may want to think about whether this company will grow or shrink. Luckily, you can check this free report showing analyst forecasts for its future.

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.