Key Insights

• Given the large stake in the stock by institutions, Brookfield Business' stock price might be vulnerable to their trading decisions
• The largest shareholder of the company is Brookfield Corporation with a 65% stake
• Insiders have bought recently

A look at the shareholders of Brookfield Business Corporation (NYSE:BBUC) can tell us which group is most powerful. We can see that institutions own the lion's share in the company with 90% ownership. That is, the group stands to benefit the most if the stock rises (or lose the most if there is a downturn).

Last week's 5.8% gain means that institutional investors were on the positive end of the spectrum even as the company has shown strong longer-term trends. The gains from last week would have further boosted the one-year return to shareholders which currently stand at 8.2%.

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

What Does The Institutional Ownership Tell Us About Brookfield Business?

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.

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

Institutional investors own over 50% of the company, so together than can probably strongly influence board decisions. Brookfield Business is not owned by hedge funds. Brookfield Corporation is currently the largest shareholder, with 65% of shares outstanding. This essentially means that they have extensive influence, if not outright control, over the future of the corporation. Meanwhile, the second and third largest shareholders, hold 8.3% and 2.1%, of the shares outstanding, respectively.

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. We're not picking up on any analyst coverage of the stock at the moment, so the company is unlikely to be widely held.

Insider Ownership Of Brookfield Business

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

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 Brookfield Business Corporation. It's a big company, so even a small proportional interest can create alignment between the board and shareholders. In this case insiders own US$1.6m worth of shares. It is always good to see at least some insider ownership, but it might be worth checking if those insiders have been selling.

General Public Ownership

The general public-- including retail investors -- own 10% stake in the company, and hence can't easily be ignored. While this group can't necessarily call the shots, it can certainly have a real influence on how the company is run.

Next Steps:

It's always worth thinking about the different groups who own shares in a company. But to understand Brookfield Business better, we need to consider many other factors. For instance, we've identified 1 warning sign for Brookfield Business that you should be aware of.

If you would prefer check out another company -- one with potentially superior financials -- then do not miss this free list of interesting companies, backed by strong financial data.

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.