The big shareholder groups in Ensurance Limited (ASX:ENA) have power over the company. Generally speaking, as a company grows, institutions will increase their ownership. Conversely, insiders often decrease their ownership over time. I quite like to see at least a little bit of insider ownership. As Charlie Munger said ‘Show me the incentive and I will show you the outcome.
With a market capitalization of AU$9.7m, Ensurance is a small cap stock, so it might not be well known by many institutional investors. Taking a look at our data on the ownership groups (below), it’s seems that institutions are not on the share registry. Let’s delve deeper into each type of owner, to discover more about Ensurance.
What Does The Lack Of Institutional Ownership Tell Us About Ensurance?
Institutional investors often avoid companies that are too small, too illiquid or too risky for their tastes. But it’s unusual to see larger companies without any institutional investors.
There are multiple explanations for why institutions don’t own a stock. The most common is that the company is too small relative to funds under management, so the institution does not bother to look closely at the company. It is also possible that fund managers don’t own the stock because they aren’t convinced it will perform well. Institutional investors may not find the historic growth of the business impressive, or there might be other factors at play. You can see the past revenue performance of Ensurance, for yourself, below.
Hedge funds don’t have many shares in Ensurance. From our data, we infer that the largest shareholder is Anthony Leibowitz (who also holds the title of Top Key Executive) with 21% of shares outstanding. Its usually considered a good sign when insiders own a significant number of shares in the company, and in this case, we’re glad to see a company insider play the role of a key stakeholder. The second and third largest shareholders are Museum Investments Limited and Goldstake Corp Pty Ltd, holding 3.0% and 2.4%, respectively.
A deeper look at our ownership data shows that the top 22 shareholders collectively hold less than 50% of the register, suggesting a large group of small holders where no one share holder has a majority.
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. 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 Ensurance
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.
It seems insiders own a significant proportion of Ensurance Limited. It has a market capitalization of just AU$9.7m, and insiders have AU$2.7m worth of shares in their own names. I would say this shows alignment with shareholders, but it is worth noting that the company is still quite small; some insiders may have founded the business. You can click here to see if those insiders have been buying or selling.
General Public Ownership
The general public, mostly retail investors, hold a substantial 62% stake in ENA, suggesting it is a fairly popular stock. This level of ownership gives retail investors the power to sway key policy decisions such as board composition, executive compensation, and the dividend payout ratio.
Private Company Ownership
Our data indicates that Private Companies hold 10%, of the company’s shares. Private companies may be related parties. Sometimes insiders have an interest in a public company through a holding in a private company, rather than in their own capacity as an individual. While it’s hard to draw any broad stroke conclusions, it is worth noting as an area for further research.
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 6 warning signs with Ensurance (at least 5 which are a bit concerning) , and understanding them should be part of your investment process.
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.
Love or hate this article? Concerned about the content? Get in touch with us directly. Alternatively, email email@example.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. 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. Thank you for reading.