Could The HiTech Group Australia Limited (ASX:HIT) Ownership Structure Tell Us Something Useful?

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The big shareholder groups in HiTech Group Australia Limited (ASX:HIT) have power over the company. Large companies usually have institutions as shareholders, and we usually see insiders owning shares in smaller companies. Warren Buffett said that he likes ‘a business with enduring competitive advantages that is run by able and owner-oriented people’. So it’s nice to see some insider ownership, because it may suggest that management is owner-oriented.

HiTech Group Australia is a smaller company with a market capitalization of AU$35m, so it may still be flying under the radar of many institutional investors. In the chart below below, we can see that institutions are not on the share registry. Let’s take a closer look to see what the different types of shareholder can tell us about HIT.

See our latest analysis for HiTech Group Australia

ASX:HIT Ownership Summary, May 6th 2019
ASX:HIT Ownership Summary, May 6th 2019

What Does The Lack Of Institutional Ownership Tell Us About HiTech Group Australia?

Institutional investors often avoid companies that are too small, too illiquid or too risky for their tastes. But it’s unusual to see larger companies without any institutional investors.

There could be various reasons why no institutions own shares in a company. Typically, small, newly listed companies don’t attract much attention from fund managers, because it would not be possible for large fund managers to build a meaningful position in the company. Alternatively, there might be something about the company that has kept institutional investors away. HiTech Group Australia might not have the sort of past performance institutions are looking for, or perhaps they simply have not studied the business closely.

ASX:HIT Income Statement, May 6th 2019
ASX:HIT Income Statement, May 6th 2019

Hedge funds don’t have many shares in HiTech Group Australia. We’re not picking up on any analyst coverage of the stock at the moment, so the company is unlikely to be widely held.

Insider Ownership Of HiTech Group Australia

While the precise definition of an insider can be subjective, almost everyone considers board members to be insiders. Management ultimately answers to the board. However, it is not uncommon for managers to be executive board members, especially if they are a founder or the CEO.

Insider ownership is positive when it signals leadership are thinking like the true owners of the company. However, high insider ownership can also give immense power to a small group within the company. This can be negative in some circumstances.

Our most recent data indicates that insiders own the majority of HiTech Group Australia Limited. This means they can collectively make decisions for the company. Given it has a market cap of AU$35m, that means they have AU$27m worth of shares. Most would argue this is a positive, showing strong alignment with shareholders. You can click here to see if those insiders have been buying or selling.

General Public Ownership

With a 18% ownership, the general public have some degree of sway over HIT. While this group can’t necessarily call the shots, it can certainly have a real influence on how the company is run.

Private Company Ownership

Our data indicates that Private Companies hold 5.8%, of the company’s shares. Private companies may be related parties. Sometimes insiders have an interest in a public company through a holding in a private company, rather than in their own capacity as an individual. While it’s hard to draw any broad stroke conclusions, it is worth noting as an area for further research.

Next Steps:

While it is well worth considering the different groups that own a company, there are other factors that are even more important.

I like to dive deeper into how a company has performed in the past. You can find historic revenue and earnings in this detailed graph.

Of course this may not be the best stock to buy. So take a peek at this free free list of interesting companies.

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.

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned. Thank you for reading.