In this analysis, my focus will be on developing a perspective on Owens Realty Mortgage Inc’s (AMEX:ORM) latest ownership structure, a less discussed, but important factor. A company’s ownership structure is often linked to its share performance in both the long- and short-term. The same amount of capital coming from an activist institution and a passive mutual fund has different implications on corporate governance, which is a decisive factor for a long-term investor. It also impacts the trading environment of company shares, which is more of a concern for short-term investors. Therefore, I will take a look at ORM’s shareholders in more detail.See our latest analysis for Owens Realty Mortgage
Institutional OwnershipWith an institutional ownership of 29.01%, ORM can face volatile stock price movements if institutions execute block trades on the open market, more so, when there are relatively small amounts of shares available on the market to trade Although ORM has a high institutional ownership, such stock moves, in the short-term, are more commonly linked to a particular type of active institutional investors – hedge funds. Hedge funds, considered active investors, hold a 6.92% stake in the company, which may be the cause of high short-term volatility in the stock price. But I also examine other ownership types and their potential impact on ORM’s investment case.
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. With a stake of 1.72%, insiders seem to have some alignment of interest with shareholders. A higher level of insider ownership has been found to reflect the choosing of projects with higher return on investments compared to lower returning projects for the sake of expansion. It would also be interesting to check what insiders have been doing with their shareholding recently. Insider buying can be a positive indicator of future performance, but a selling decision can be simply driven by personal financial requirements.
General Public OwnershipA big stake of 61.19% in ORM is held by the general public. With this size of ownership, retail investors can collectively play a role in major company policies that affect shareholders returns, including executive remuneration and the appointment of directors. They can also exercise the power to decline an acquisition or merger that may not improve profitability.
Private Company OwnershipAnother important group of owners for potential investors in ORM are private companies that hold a stake of 1.17% in ORM. These are companies that are mainly invested due to their strategic interests or are incentivized by reaping capital gains on investments their shareholdings. However, an ownership of this size may be relatively insignificant, meaning that these shareholders may not have the potential to influence ORM’s business strategy. Thus, investors not need worry too much about the consequences of these holdings.
With significant institutional ownership, including active hedge, existing investors should seek a margin of safety when investing in ORM. This will allow an investor to reduce the impact of non-fundamental factors, such as volatile block trading impact on their portfolio value. However, ownership structure should not be the only focus of your research when constructing an investment thesis around ORM. Rather, you should be examining fundamental factors such as Owens Realty Mortgage’s past track record and financial health. I highly recommend you to complete your research by taking a look at the following:
- Future Outlook: What are well-informed industry analysts predicting for ORM’s future growth? Take a look at our free research report of analyst consensus for ORM’s outlook.
- Past Track Record: Has ORM been consistently performing well irrespective of the ups and downs in the market? Go into more detail in the past performance analysis and take a look at the free visual representations of ORM’s historicals for more clarity.
- Other High-Performing Stocks: Are there other stocks that provide better prospects with proven track records? Explore our free list of these great stocks here.