In this analysis, my focus will be on developing a perspective on GBM Resources Limited’s (ASX:GBZ) latest ownership structure, a less discussed, but important factor. The impact of a company’s ownership structure affects both its short- and long-term performance. The effect of an active institutional investor with a similar ownership as a passive pension-fund can be vastly different on a company’s corporate governance and accountability to shareholders. While this may be more interesting for long-term investors, short-term investors can also benefit by paying attention to when these institutions trade in order to take advantage of the heightened volatility. Therefore, it is beneficial for us to examine GBZ’s ownership structure in more detail.
Check out our latest analysis for GBM ResourcesInstitutional 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. With an institutional ownership of 5.79%, GBZ doesn’t seem too exposed to higher volatility resulting from institutional trading. Low coverage stocks like GBZ tend to be favourite picks of legendary investor Peter Lynch, who used to cash in on the rally supported by institutional buying as the stock gained popularity.Insider Ownership
I find insiders are another important group of stakeholders, who are directly involved in making key decisions related to the use of capital. In essence, insider ownership is more about the alignment of shareholders’ interests with the management. 37.33% ownership of GBZ 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). Another aspect of insider ownership is to learn about their recent transactions. While insider buying is possibly a sign of a positive outlook for the company, selling doesn’t necessarily indicate a negative outlook as they may be selling to meet personal financial needs.General Public Ownership
A big stake of 52.82% in GBZ is held by the general public. 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
Another group of owners that a potential investor in GBZ should consider are private companies, with a stake of 4.06%. While they invest more often due to strategic interests, an investment can also be driven by capital gains through share price appreciation. However, an ownership of this size may be relatively insignificant, meaning that these shareholders may not have the potential to influence GBZ’s business strategy. Thus, investors not need worry too much about the consequences of these holdings.Next Steps:
Institutional ownership in GBZ is not at a level that would concern investors. We are less likely to see sustained downtrends or significant volatility resulting from large institutional trading. However, ownership structure should not be the only determining factor when you’re building an investment thesis for GBZ. Rather, you should be looking at fundamental drivers such as GBM Resources’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 GBZ’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 GBZ 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 GBZ’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.