Why Advanced Braking Technology Limited’s (ASX:ABV) Investor Composition Impacts Your Returns

In this article, I will take a quick look at Advanced Braking Technology Limited’s (ASX:ABV) recent ownership structure – an unconventional investing subject, but an important one. The impact of a company’s ownership structure affects both its short- and long-term performance. Differences in ownership structure of companies can have a profound effect on how management’s incentives are aligned with shareholder returns, and whether they adhere to corporate governance best practices. Although this is an important factor for long-term investors, many investors can also be impacted by institutional presence and their high-volume trading. Now I will analyze ABV’s shareholder registry in more detail.

Check out our latest analysis for Advanced Braking Technology
ASX:ABV Ownership_summary May 9th 18
ASX:ABV Ownership_summary May 9th 18

Institutional Ownership

Institutional investors transact in large blocks which can influence the momentum of stock prices, at least in the short-term, especially when there is a low level of public shares available on the market to trade. With an institutional ownership of 9.58%, ABV doesn’t seem too exposed to higher volatility resulting from institutional trading.

Insider Ownership

Another important group of shareholders are company insiders. Insider ownership has to do more with how the company is managed and less to do with the direct impact of the magnitude of shares trading on the market. ABV insiders hold a significant stake of 29.29% in the company. This level of insider ownership has been found to have a negative impact on companies with consistently low PE ratios (underperformers), while it has been positive in the case of high PE ratio firms (outperformers). It’s also interesting to learn what ABV insiders have been doing with their shareholdings 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.
ASX:ABV Insider_trading May 9th 18
ASX:ABV Insider_trading May 9th 18

General Public Ownership

The general public holds a substantial 51.16% stake in ABV, making it a highly popular stock among retail investors. 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 Ownership

Another group of owners that a potential investor in ABV should consider are private companies, with a stake of 9.96%. While they invest more often due to strategic interests, an investment can also be driven by capital gains through share price appreciation. This kind of ownership, if predominantly strategic, can give these companies a significant power to affect ABV’s business strategy. Thus, potential investors should look into these business relations and check how it can impact long-term shareholder returns.

Next Steps:

Institutional ownership level and composition in ABV is not high nor active enough to significantly impact its investment thesis. However, if you are building an investment case for ABV, ownership structure alone should not dictate your decision to buy or sell the stock. Rather, you should be looking at fundamental drivers such as the intrinsic valuation, which is a key driver of Advanced Braking Technology’s share price. I highly recommend you to complete your research by taking a look at the following:

  1. Financial Health: Is ABV’s operations financially sustainable? Balance sheets can be hard to analyze, which is why we’ve done it for you. Check out our financial health checks here.
  2. Past Track Record: Has ABV 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 ABV’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.
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.