Why DataDot Technology Limited's (ASX:DDT) Investor Composition Impacts Your Returns

I am going to take a deep dive into DataDot Technology Limited’s (ASX:DDT) most recent ownership structure, not a frequent subject of discussion among individual 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. 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. Now I will analyze DDT's shareholder registry in more detail.

Check out our latest analysis for DataDot Technology

Institutional Ownership

Institutional investors are one of the largest group of market participants and their buy-sell decisions on a company's stock can significantly impact prices, more so, when there are relatively small amounts of shares available on the market to trade. A low institutional ownership of 7.39% puts DDT on a list of companies that are not likely exposed to spikes in volatility resulting from institutional trading.

Insider Ownership

Insiders 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. A major group of owners of DDT is individual insiders, sitting with a hefty 19.75% stake in the company. Broadly, insider ownership of this level has been found to negatively affect companies with consistently low PE ratio (underperforming). And a positive impact has been seen on companies with a high PE ratio (outperforming). Another aspect of insider ownership is to learn about their recent transactions. 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.

General Public Ownership

The general public holds a substantial 68.32% stake in DDT, 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

Potential investors in DDT should also look at another important group of investors: private companies, with a stake of 4.55%, who are primarily invested because of strategic and capital gain interests. However, an ownership of this size may be relatively insignificant, meaning that these shareholders may not have the potential to influence DDT's business strategy. Thus, investors not need worry too much about the consequences of these holdings.

Next Steps:

With a low level of institutional ownership, investors in DDT need not worry about non-fundamental factors such as ownership structure causing large impact on stock prices. However, ownership structure should not be the only determining factor when you’re building an investment thesis for DDT. Rather, you should be examining fundamental factors such as DataDot Technology's past track record and financial health. I highly recommend you to complete your research by taking a look at the following:

1. Financial Health: Is DDT’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 DDT 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 DDT'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.

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Simply Wall St analyst Simply Wall St and Simply Wall St have no position in any of the companies mentioned. This article is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. 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.