In this analysis, my focus will be on developing a perspective on DATA Communications Management Corp’s (TSX:DCM) latest ownership structure, a less discussed, but important factor. When it comes to ownership structure of a company, the impact has been observed in both the long-and short-term performance of shares. Different types of investors can have varying degrees of influence on a company’s management team. For example, an active institutional investor may be more likely to hold a company accountable for certain actions whereas a passive fund will move in and out of stocks without regards to corporate governance. The implications of these institutions’ actions can either benefit or hinder individual investors, so it is important to understand the ownership composition of your stock investment. Now I will analyze DCM’s shareholder registry in more detail.See our latest analysis for DCM
Institutional OwnershipDue to the big order sizes of institutional investors, a company’s shares can experience large, one-sided momentum, driven by high volume of shares removed from, or injected into, the market. A low institutional ownership of 1.73% puts DCM on a list of companies that are not likely exposed to spikes in volatility resulting from institutional trading. Less covered stocks like DCM used to feature in legendary investor Peter Lynch’s portfolio, which would later be bought up by fast-following institutions as the stock gained more popularity.
Insider OwnershipI find insiders are another important group of stakeholders, who are directly involved in making key decisions related to the use of capital. In essence, insider ownership is more about the alignment of shareholders’ interests with the management. 16.80% ownership of DCM insiders is large enough to make an impact on shareholder returns. In general, this level of insider ownership has negatively affected underperforming (consistently low PE ratio) companies and positively affected the companies that outperform (consistently high PE ratio). It may be interesting to take a look at what company insiders have been doing with their holdings lately. While insider buying is possibly a sign of a positive outlook for the company, selling doesn’t necessarily indicate a negative outlook as they may be selling to meet personal financial needs.
General Public OwnershipThe general public holds a substantial 63.52% stake in DCM, making it a highly popular stock among retail investors. This size of ownership gives retail investors collective power in deciding on major policy decisions such as executive compensation, appointment of directors and acquisitions of businesses. This level of ownership gives retail investors the power to sway key policy decisions such as board composition, executive compensation, and potential acquisitions. This is a positive sign for an investor who wants to be involved in key decision-making of the company.
Private Company OwnershipPotential investors in DCM should also look at another important group of investors: private companies, with a stake of 17.95%, who are primarily invested because of strategic and capital gain interests. This kind of ownership, if predominantly strategic, can give these companies a significant power to affect DCM’s business strategy. Thus, potential investors should look into these business relations and check how it can impact long-term shareholder returns.
What this means for you:
Are you a shareholder? Institutional ownership level and composition in DCM is not high nor active enough to significantly impact its investment thesis. If you’re interested in bolstering your portfolio with new stocks and are looking for ideas, take a look at our free app to see my list of stocks with a strong growth potential.
Are you a potential investor? If you are building an investment case for DCM, ownership structure alone should not dictate your decision to buy or sell the stock. Rather, you should be looking at fundamental drivers like the future growth expectations around DCM, which is a key factor that will influence DCM’s share value. Take a look at our most recent infographic report on DCM for a more in-depth analysis of these factors to help you make a more well-informed investment decision.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.