Today, I will be analyzing Chongherr Investments Ltd’s (ASX:CDH) recent ownership structure, an important but not-so-popular subject among individual investors. Ownership structure has been found to have an impact on shareholder returns in both short- and long-term. 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. Therefore, it is beneficial for us to examine CDH’s ownership structure in more detail.View our latest analysis for Chongherr Investments
Insider OwnershipAnother 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. A major group of owners of CDH is individual insiders, sitting with a hefty 37.52% 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. Insiders buying company shares can be a positive indicator of future performance, but a selling decision can simply be driven by personal financial needs.
General Public OwnershipWith 3.92% ownership, the general public are a relatively smaller ownership class in CDH. This size of ownership, while considerably small for a public company, may not be enough to change company policy if the decision is not in sync with other large shareholders.
Private Company OwnershipAnother group of owners that a potential investor in CDH should consider are private companies, with a stake of 58.56%. 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 CDH’s business strategy. Thus, potential investors should look into these business relations and check how it can impact long-term shareholder returns.
A relatively significant holding of company insiders could mean high alignment with shareholders. But at the same time, investors should be aware of the level of influence executives could have on governance decisions. However, ownership structure should not be the only determining factor when you’re building an investment thesis for CDH. Rather, you should be looking at fundamental drivers such as Chongherr Investments’s past track record and financial health. I urge you to complete your research by taking a look at the following:
- 1. Financial Health: Is CDH’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 CDH 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 CDH’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.