Key Insights

• The considerable ownership by sovereign wealth funds in Sime Darby Berhad indicates that they collectively have a greater say in management and business strategy

• 59% of the business is held by the top 2 shareholders

• Institutional ownership in Sime Darby Berhad is 36%

A look at the shareholders of Sime Darby Berhad (KLSE:SIME) can tell us which group is most powerful. With 45% stake, sovereign wealth funds possess the maximum shares in the company. Put another way, the group faces the maximum upside potential (or downside risk).

While sovereign wealth funds were the group that benefitted the most from last week’s RM682m market cap gain, institutions too had a 36% share in those profits.

In the chart below, we zoom in on the different ownership groups of Sime Darby Berhad.

Check out our latest analysis for Sime Darby Berhad

What Does The Institutional Ownership Tell Us About Sime Darby Berhad?

Institutions typically measure themselves against a benchmark when reporting to their own investors, so they often become more enthusiastic about a stock once it's included in a major index. We would expect most companies to have some institutions on the register, especially if they are growing.

Sime Darby Berhad already has institutions on the share registry. Indeed, they own a respectable stake in the company. This can indicate that the company has a certain degree of credibility in the investment community. However, it is best to be wary of relying on the supposed validation that comes with institutional investors. They too, get it wrong sometimes. 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 Sime Darby Berhad, (below). Of course, keep in mind that there are other factors to consider, too.

Hedge funds don't have many shares in Sime Darby Berhad. The company's largest shareholder is Permodalan Nasional Berhad, with ownership of 45%. Employees Provident Fund of Malaysia is the second largest shareholder owning 14% of common stock, and Kumpulan Wang Persaraan holds about 7.7% of the company stock.

A more detailed study of the shareholder registry showed us that 2 of the top shareholders have a considerable amount of ownership in the company, via their 59% stake.

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.