Key Insights

• Institutions' substantial holdings in TopBuild implies that they have significant influence over the company's share price
• A total of 15 investors have a majority stake in the company with 51% ownership
• Using data from analyst forecasts alongside ownership research, one can better assess the future performance of a company

To get a sense of who is truly in control of TopBuild Corp. (NYSE:BLD), it is important to understand the ownership structure of the business. The group holding the most number of shares in the company, around 85% to be precise, is institutions. Put another way, the group faces the maximum upside potential (or downside risk).

As a result, institutional investors endured the highest losses last week after market cap fell by US$534m. This set of investors may especially be concerned about the current loss, which adds to a one-year loss of 22% for shareholders. Often called “market movers", institutions wield significant power in influencing the price dynamics of any stock. As a result, if the downtrend continues, institutions may face pressures to sell TopBuild, which might have negative implications on individual investors.

In the chart below, we zoom in on the different ownership groups of TopBuild.

View our latest analysis for TopBuild

What Does The Institutional Ownership Tell Us About TopBuild?

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 TopBuild 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 TopBuild, (below). Of course, keep in mind that there are other factors to consider, too.

Since institutional investors own more than half the issued stock, the board will likely have to pay attention to their preferences. We note that hedge funds don't have a meaningful investment in TopBuild. The company's largest shareholder is BlackRock, Inc., with ownership of 10%. The Vanguard Group, Inc. is the second largest shareholder owning 9.5% of common stock, and FMR LLC holds about 5.5% of the company stock.

After doing some more digging, we found that the top 15 have the combined ownership of 51% in the company, suggesting that no single shareholder has significant control over the company.

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 are plenty of analysts covering the stock, so it might be worth seeing what they are forecasting, too.

Insider Ownership Of TopBuild

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.

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 less than 1% of TopBuild Corp.. It is a very large company, so it would be surprising to see insiders own a large proportion of the company. Though their holding amounts to less than 1%, we can see that board members collectively own US$74m worth of shares (at current prices). It is good to see board members owning shares, but it might be worth checking if those insiders have been buying.

General Public Ownership

With a 14% ownership, the general public, mostly comprising of individual investors, have some degree of sway over TopBuild. While this group can't necessarily call the shots, it can certainly have a real influence on how the company is run.

Next Steps:

I find it very interesting to look at who exactly owns a company. But to truly gain insight, we need to consider other information, too. Consider for instance, the ever-present spectre of investment risk. We've identified 1 warning sign with TopBuild , and understanding them should be part of your investment process.

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.

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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.