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UFP Industries, Inc.'s (NASDAQ:UFPI) -US$265m Market Value Fall May Be Overlooked by Institutional Investors After a Year of 6.6% Returns

Simply Wall St ·  {{timeTz}}

To get a sense of who is truly in control of UFP Industries, Inc. (NASDAQ:UFPI), it is important to understand the ownership structure of the business. With 84% stake, institutions possess the maximum shares in the company. That is, the group stands to benefit the most if the stock rises (or lose the most if there is a downturn).

Institutional investors was the group most impacted after the company's market cap fell to US$4.5b last week. Still, the 6.6% one-year gains may have helped mitigate their overall losses. But they would probably be wary of future losses.

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

See our latest analysis for UFP Industries

ownership-breakdownNasdaqGS:UFPI Ownership Breakdown September 19th 2022

What Does The Institutional Ownership Tell Us About UFP Industries?

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 UFP Industries. 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. 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 UFP Industries' historic earnings and revenue below, but keep in mind there's always more to the story.

earnings-and-revenue-growthNasdaqGS:UFPI Earnings and Revenue Growth September 19th 2022

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 UFP Industries. BlackRock, Inc. is currently the company's largest shareholder with 17% of shares outstanding. For context, the second largest shareholder holds about 12% of the shares outstanding, followed by an ownership of 4.4% by the third-largest shareholder. Furthermore, CEO Matthew Missad is the owner of 0.5% of the company's shares.

We also observed that the top 9 shareholders account for more than half of the share register, with a few smaller shareholders to balance the interests of the larger ones to a certain extent.

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 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 UFP Industries

While the precise definition of an insider can be subjective, almost everyone considers board members to be insiders. 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.

We can report that insiders do own shares in UFP Industries, Inc.. This is a big company, so it is good to see this level of alignment. Insiders own US$110m worth of shares (at current prices). It is good to see this level of investment by insiders. You can check here to see if those insiders have been buying recently.

General Public Ownership

With a 14% ownership, the general public, mostly comprising of individual investors, have some degree of sway over UFP Industries. This size of ownership, while considerable, may not be enough to change company policy if the decision is not in sync with other large shareholders.

Next Steps:

While it is well worth considering the different groups that own a company, there are other factors that are even more important. Consider for instance, the ever-present spectre of investment risk. We've identified 2 warning signs with UFP Industries (at least 1 which is a bit unpleasant) , 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.

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