Could The Middlesex Water Company (NASDAQ:MSEX) Ownership Structure Tell Us Something Useful?

Every investor in Middlesex Water Company (NASDAQ:MSEX) should be aware of the most powerful shareholder groups. Institutions often own shares in more established companies, while it’s not unusual to see insiders own a fair bit of smaller companies. Companies that have been privatized tend to have low insider ownership.

Middlesex Water has a market capitalization of US$1.2b, so we would expect some institutional investors to have noticed the stock. Taking a look at our data on the ownership groups (below), it’s seems that institutional investors have bought into the company. We can zoom in on the different ownership groups, to learn more about Middlesex Water.

See our latest analysis for Middlesex Water

NasdaqGS:MSEX Ownership Summary, February 25th 2020
NasdaqGS:MSEX Ownership Summary, February 25th 2020

What Does The Institutional Ownership Tell Us About Middlesex Water?

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.

Middlesex Water already has institutions on the share registry. Indeed, they own 62% of the company. 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 Middlesex Water’s historic earnings and revenue, below, but keep in mind there’s always more to the story.

NasdaqGS:MSEX Income Statement, February 25th 2020
NasdaqGS:MSEX Income Statement, February 25th 2020

Institutional investors own over 50% of the company, so together than can probably strongly influence board decisions. Hedge funds don’t have many shares in Middlesex Water. Looking at our data, we can see that the largest shareholder is T. Rowe Price Group, Inc. with 10% of shares outstanding. Next, we have BlackRock, Inc. and The Vanguard Group, Inc. as the second and third largest shareholders, holding 7.6% and 6.2%, of the shares outstanding, respectively.

Additionally, we found that the top 19 have the combined ownership of 50% in the company, suggesting that no one share holder has significant control over the company.

While it makes sense to study institutional ownership data for a company, it also makes sense to study analyst sentiments to know which way the wind is blowing. Quite a few analysts cover the stock, so you could look into forecast growth quite easily.

Insider Ownership Of Middlesex Water

The definition of an insider can differ slightly between different countries, but members of the board of directors always count. Company management run the business, but the CEO will answer to the board, even if he or she is a member of it.

I generally consider insider ownership to be a good thing. However, on some occasions it makes it more difficult for other shareholders to hold the board accountable for decisions.

I can report that insiders do own shares in Middlesex Water Company. The insiders have a meaningful stake worth US$40m. Most would see this as a real positive. If you would like to explore the question of insider alignment, you can click here to see if insiders have been buying or selling.

General Public Ownership

With a 35% ownership, the general public have some degree of sway over MSEX. 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:

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 Middlesex Water , and understanding them should be part of your investment process.

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.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned.

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