Institutional investors may overlook Westgold Resources Limited's (ASX:WGX) recent AU$207m market cap drop as long-term gains remain positive

Key Insights

• Significantly high institutional ownership implies Westgold Resources' stock price is sensitive to their trading actions
• The top 12 shareholders own 51% of the company
• Insiders have been buying lately

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Every investor in Westgold Resources Limited (ASX:WGX) should be aware of the most powerful shareholder groups. We can see that institutions own the lion's share in the company with 67% ownership. That is, the group stands to benefit the most if the stock rises (or lose the most if there is a downturn).

Losing money on investments is something no shareholder enjoys, least of all institutional investors who saw their holdings value drop by 7.6% last week. However, the 18% one-year returns may have helped alleviate their overall losses. But they would probably be wary of future losses.

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

Check out our latest analysis for Westgold Resources

What Does The Institutional Ownership Tell Us About Westgold Resources?

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.

As you can see, institutional investors have a fair amount of stake in Westgold Resources. 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 Westgold Resources' historic earnings and revenue below, but keep in mind there's always more to the story.

Since institutional investors own more than half the issued stock, the board will likely have to pay attention to their preferences. Hedge funds don't have many shares in Westgold Resources. L1 Capital Pty. Limited is currently the largest shareholder, with 9.4% of shares outstanding. Van Eck Associates Corporation is the second largest shareholder owning 8.0% of common stock, and State Street Global Advisors, Inc. holds about 7.1% of the company stock.

After doing some more digging, we found that the top 12 have the combined ownership of 51% in the company, suggesting that no single shareholder has significant control over the company.

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

Insider Ownership Of Westgold Resources

The definition of company insiders can be subjective and does vary between jurisdictions. Our data reflects individual insiders, capturing board members at the very least. 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.

Our information suggests that Westgold Resources Limited insiders own under 1% of the company. Keep in mind that it's a big company, and the insiders own AU$2.9m worth of shares. The absolute value might be more important than the proportional share. Arguably, recent buying and selling is just as important to consider. You can click here to see if insiders have been buying or selling.

General Public Ownership

The general public-- including retail investors -- own 32% stake in the company, and hence can't easily be ignored. 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:

It's always worth thinking about the different groups who own shares in a company. But to understand Westgold Resources better, we need to consider many other factors. For instance, we've identified 3 warning signs for Westgold Resources (1 is significant) that you should be aware of.

Ultimately the future is most important. You can access this free report on analyst forecasts for the company .

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.