In this article, I’m going to take a look at SIG plc’s (LSE:SHI) latest ownership structure, a non-fundamental factor which is important, but remains a less discussed subject among investors. 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. Therefore, I will take a look at SHI’s shareholders in more detail.Check out our latest analysis for SIG
Institutional OwnershipSHI’s 90.53% institutional ownership seems enough to cause large share price movements in the case of significant share sell-off or acquisitions by institutions, particularly when there is a low level of public shares available on the market to trade. Although SHI 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. In the case of SHI, investors need not worry about such volatility considering active hedge funds don’t have a significant stake. However, we should dig deeper into SHI’s ownership structure and find out how other key ownership classes can affect its investment profile.
Insider OwnershipInsiders form another group of important ownership types as they manage the company’s operations and decide the best use of capital. Insider ownership has been linked to better alignment between management and shareholders. Although individuals in SHI hold only a minor stake, it’s a good sign for shareholders as the company’s executives and directors have their incentives directly linked to the company’s performance. I will also like to check what insiders have been doing recently with their holdings. Insider buying may be a sign of upbeat future expectations, however, selling doesn’t necessarily mean the opposite as insiders may be motivated by their personal financial needs.
Private Company OwnershipAnother important group of owners for potential investors in SHI are private companies that hold a stake of 5.71% in SHI. These are companies that are mainly invested due to their strategic interests or are incentivized by reaping capital gains on investments their shareholdings. An ownership of this size indicates a strong financial backing and has the potential to influence SHI’s business strategy. Thus, investors should dig deeper into SHI’s business relations with these companies and how it can affect shareholder returns in the long-term.
What this means for you:
The company’s high institutional ownership makes margin of safety a very important consideration to existing investors since long bull and bear trends often emerge when these big-ticket investors see a change in long-term potential of the company. This will allow investors to reduce the impact of non-fundamental factors, such as volatile block trading impact on their portfolio value. However, if you are building an investment case for SHI, ownership structure alone should not dictate your decision to buy or sell the stock. Rather, you should be examining fundamental factors such as SIG’s past track record and financial health. I highly recommend you to complete your research by taking a look at the following:
1. Future Outlook: What are well-informed industry analysts predicting for SHI’s future growth? Take a look at our free research report of analyst consensus for SHI’s outlook.
2. Past Track Record: Has SHI 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 SHI’s historicals for more clarity.
3. 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.