Every investor in Hurco Companies, Inc. (NASDAQ:HURC) should be aware of the most powerful shareholder groups. Insiders often own a large chunk of younger, smaller, companies while huge companies tend to have institutions as shareholders. I generally like to see some degree of insider ownership, even if only a little. As Nassim Nicholas Taleb said, ‘Don’t tell me what you think, tell me what you have in your portfolio.
Hurco Companies is not a large company by global standards. It has a market capitalization of US$202m, which means it wouldn’t have the attention of many institutional investors. In the chart below, we can see that institutions are noticeable on the share registry. We can zoom in on the different ownership groups, to learn more about Hurco Companies.
What Does The Institutional Ownership Tell Us About Hurco Companies?
Institutional investors commonly compare their own returns to the returns of a commonly followed index. So they generally do consider buying larger companies that are included in the relevant benchmark index.
We can see that Hurco Companies does have institutional investors; and they hold a good portion of the company’s stock. This suggests some credibility amongst professional investors. But we can’t rely on that fact alone since institutions make bad investments sometimes, just like everyone does. 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 Hurco Companies’ historic earnings and revenue below, but keep in mind there’s always more to the story.
Institutional investors own over 50% of the company, so together than can probably strongly influence board decisions. It looks like hedge funds own 5.9% of Hurco Companies shares. That’s interesting, because hedge funds can be quite active and activist. Many look for medium term catalysts that will drive the share price higher. Royce & Associates, LP is currently the largest shareholder, with 13% of shares outstanding. Meanwhile, the second and third largest shareholders, hold 8.7% and 8.4%, of the shares outstanding, respectively. Additionally, the company’s CEO Michael Doar directly holds 2.0% of the total shares outstanding.
On further inspection, we found that more than half the company’s shares are owned by the top 7 shareholders, suggesting that the interests of the larger shareholders are balanced out to an extent by the smaller ones.
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 Hurco Companies
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.
Shareholders would probably be interested to learn that insiders own shares in Hurco Companies, Inc.. In their own names, insiders own US$15m worth of stock in the US$202m company. Some would say this shows alignment of interests between shareholders and the board. But it might be worth checking if those insiders have been selling.
General Public Ownership
The general public, with a 11% stake in the company, will not easily be ignored. 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.
It’s always worth thinking about the different groups who own shares in a company. But to understand Hurco Companies better, we need to consider many other factors. Be aware that Hurco Companies is showing 2 warning signs in our investment analysis , and 1 of those makes us a bit uncomfortable…
Of course this may not be the best stock to buy. So take a peek at this free free list of interesting companies.
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. 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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