Is McMillan Shakespeare Limited (ASX:MMS) Popular Amongst Insiders?

By
Simply Wall St
Published
September 28, 2020
ASX:MMS

The big shareholder groups in McMillan Shakespeare Limited (ASX:MMS) have power over the company. Institutions often own shares in more established companies, while it's not unusual to see insiders own a fair bit of smaller companies. I generally like to see some degree of insider ownership, even if only a little. As Nassim Nicholas Taleb said, 'Don’t tell me what you think, tell me what you have in your portfolio.

McMillan Shakespeare is a smaller company with a market capitalization of AU$649m, so it may still be flying under the radar of many institutional investors. Our analysis of the ownership of the company, below, shows that institutions own shares in the company. Let's delve deeper into each type of owner, to discover more about McMillan Shakespeare.

Check out our latest analysis for McMillan Shakespeare

ownership-breakdown
ASX:MMS Ownership Breakdown September 29th 2020

What Does The Institutional Ownership Tell Us About McMillan Shakespeare?

Institutional investors commonly compare their own returns to the returns of a commonly followed index. So they generally do consider buying larger companies that are included in the relevant benchmark index.

We can see that McMillan Shakespeare does have institutional investors; and they hold a good portion of the company's stock. This can indicate that the company has a certain degree of credibility in the investment community. However, it is best to be wary of relying on the supposed validation that comes with institutional investors. They too, get it wrong sometimes. It is not uncommon to see a big share price drop if two large institutional investors try to sell out of a stock at the same time. So it is worth checking the past earnings trajectory of McMillan Shakespeare, (below). Of course, keep in mind that there are other factors to consider, too.

earnings-and-revenue-growth
ASX:MMS Earnings and Revenue Growth September 29th 2020

We note that hedge funds don't have a meaningful investment in McMillan Shakespeare. Invesco Ltd. is currently the largest shareholder, with 8.4% of shares outstanding. With 7.8% and 5.9% of the shares outstanding respectively, Chessari Holdings Proprietary Limited and BlackRock, Inc. are the second and third largest shareholders.

A closer look at our ownership figures suggests that the top 13 shareholders have a combined ownership of 51% implying that no single shareholder has a majority.

While it makes sense to study institutional ownership data for a company, it also makes sense to study analyst sentiments to know which way the wind is blowing. There are a reasonable number of analysts covering the stock, so it might be useful to find out their aggregate view on the future.

Insider Ownership Of McMillan Shakespeare

While the precise definition of an insider can be subjective, almost everyone considers board members to be insiders. The company management answer to the board and the latter should represent the interests of shareholders. Notably, sometimes top-level managers are on the board themselves.

Most consider insider ownership a positive because it can indicate the board is well aligned with other shareholders. However, on some occasions too much power is concentrated within this group.

Shareholders would probably be interested to learn that insiders own shares in McMillan Shakespeare Limited. In their own names, insiders own AU$37m worth of stock in the AU$649m company. It is good to see some investment by insiders, but it might be worth checking if those insiders have been buying.

General Public Ownership

The general public holds a 42% stake in McMillan Shakespeare. 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

We can see that Private Companies own 9.3%, of the shares on issue. 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:

It's always worth thinking about the different groups who own shares in a company. But to understand McMillan Shakespeare better, we need to consider many other factors. Consider for instance, the ever-present spectre of investment risk. We've identified 3 warning signs with McMillan Shakespeare , and understanding them should be part of your investment process.

Ultimately the future is most important. You can access this free report on analyst forecasts for the company.

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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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. 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. Simply Wall St has no position in any stocks mentioned.
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