If you want to know who really controls Centrex Metals Limited (ASX:CXM), then you’ll have to look at the makeup of its share registry. Large companies usually have institutions as shareholders, and we usually see insiders owning shares in smaller companies. Warren Buffett said that he likes ‘a business with enduring competitive advantages that is run by able and owner-oriented people’. So it’s nice to see some insider ownership, because it may suggest that management is owner-oriented.
With a market capitalization of AU$14m, Centrex Metals is a small cap stock, so it might not be well known by many institutional investors. In the chart below, we can see that institutional investors have not yet purchased shares. We can zoom in on the different ownership groups, to learn more about Centrex Metals.
What Does The Lack Of Institutional Ownership Tell Us About Centrex Metals?
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 fund under management, so the institition does not bother to look closely at the company. Alternatively, there might be something about the company that has kept institutional investors away. Centrex Metals’s earnings and revenue track record (below) may not be compelling to institutional investors — or they simply might not have looked at the business closely.
We note that hedge funds don’t have a meaningful investment in Centrex Metals. Our data shows that Jason Chrisp is the largest shareholder with 35% of shares outstanding. China Baowu Steel Group Corporation Limited is the second largest shareholder with 13% of common stock, followed by Baotou Iron and Steel (Group) Co., Ltd., holding 6.9% of the stock.
Our analysis suggests that the top 3 shareholders collectively control 55% of the company’s shares, implying that they have considerable power to influence the company’s decisions.
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. As far I can tell there isn’t analyst coverage of the company, so it is probably flying under the radar.
Insider Ownership Of Centrex Metals
The definition of an insider can differ slightly between different countries, but members of the board of directors always count. 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.
It seems insiders own a significant proportion of Centrex Metals Limited. Insiders have a AU$6.6m stake in this AU$14m business. Ownership is clearly an important issue when it comes to investment selection. However, there are many other factors to consider, such as the risks within the company itself. For example, we’ve discovered 5 warning signs for Centrex Metals (of which 2 are major) which any shareholder or potential investor should be aware of.
General Public Ownership
The general public holds a 29% stake in CXM. 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.
Private Company Ownership
Our data indicates that Private Companies hold 22%, of the company’s shares. It might be worth looking deeper into this. If related parties, such as insiders, have an interest in one of these private companies, that should be disclosed in the annual report. Private companies may also have a strategic interest in the company.
It’s always worth thinking about the different groups who own shares in a company. But to understand Centrex Metals better, we need to consider many other factors.
I like to dive deeper into how a company has performed in the past. You can access this interactive graph of past earnings, revenue and cash flow for free.
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.
If you spot an error that warrants correction, please contact the editor at 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. Simply Wall St has no position in the stocks mentioned.
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