In this article, I’m going to take a look at Copper Strike Limited’s (ASX:CSE) latest ownership structure, a non-fundamental factor which is important, but remains a less discussed subject among investors. The impact of a company’s ownership structure affects both its short- and long-term performance. If an activist institution invests the same amount of capital in a stock as a passive long-term pension fund, the implications are potentially different for key corporate financing decisions such as the use of excess cash or the source of financing. While these are more of a long-term investor’s concern, short-term investors may find the impact of institutional trading overwhelming enough to lose out on what could be a potential opportunity. Now I will analyze CSE’s shareholder registry in more detail.
Institutional OwnershipWith an institutional ownership of 19.25%, CSE can face volatile stock price movements if institutions execute block trades on the open market, more so, when there are relatively small amounts of shares available on the market to trade However, as not all institutions are alike, such high volatility events, especially in the short-term, have been more frequently linked to active market participants like hedge funds. For CSE shareholders, the potential of this type of share price volatility shouldn’t be as concerning as hedge fund ownership is is not significant,indicating few chances of such sudden price moves. While that hardly seems concerning, I will explore further into CSE’s ownership type to find out how it can affect the company’s investment profile.
Insider OwnershipInsiders form a 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. 43.42% ownership of CSE insiders is large enough to make an impact on shareholder returns. In general, this level of insider ownership has negatively affected underperforming (consistently low PE ratio) companies and positively affected the companies that outperform (consistently high PE ratio). It may be interesting to take a look at what company insiders have been doing with their holdings lately. 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 OwnershipA big stake of 19.15% in CSE is held by the general public. This level of ownership gives retail investors the power to sway key policy decisions such as board composition, executive compensation, and potential acquisitions. This is a positive sign for an investor who wants to be involved in key decision-making of the company.
Private Company OwnershipAnother group of owners that a potential investor in CSE should consider are private companies, with a stake of 18.18%. While they invest more often due to strategic interests, an investment can also be driven by capital gains through share price appreciation. With this size of ownership in CSE, this ownership class can affect the company’s business strategy. As a result, potential investors should further explore the company’s business relations with these companies and find out if they can affect shareholder returns in the long-term.
The company’s high institutional ownership makes margin of safety a very important consideration to existing investors since long bull and bear trends often emerge when these big-ticket investors see a change in long-term potential of the company. This will allow investors to reduce the impact of non-fundamental factors, such as volatile block trading impact on their portfolio value. However, if you are building an investment case for CSE, ownership structure alone should not dictate your decision to buy or sell the stock. Rather, you should be examining fundamental factors such as the intrinsic valuation, which is a key driver of Copper Strike’s share price. I urge you to complete your research by taking a look at the following:
- Financial Health: Is CSE’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.
- Past Track Record: Has CSE 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 CSE’s historicals for more clarity.
- 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.