Could Adveritas Limited’s (ASX:AV1) Investor Composition Influence The Stock Price?

The big shareholder groups in Adveritas Limited (ASX:AV1) have power over the company. Insiders often own a large chunk of younger, smaller, companies while huge companies tend to have institutions as shareholders. 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.

Adveritas is a smaller company with a market capitalization of AU$25m, so it may still be flying under the radar of many institutional investors. Taking a look at our data on the ownership groups (below), it’s seems that institutions are not really that prevalent on the share registry. We can zoom in on the different ownership groups, to learn more about AV1.

Check out our latest analysis for Adveritas

ASX:AV1 Ownership Summary, April 5th 2019
ASX:AV1 Ownership Summary, April 5th 2019

What Does The Institutional Ownership Tell Us About Adveritas?

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.

Since institutions own under 5% of Adveritas, many may not have spent much time considering the stock. But it’s clear that some have; and they liked it enough to buy in. If the company is growing earnings, that may indicate that it is just beginning to catch the attention of these deep-pocketed investors. We sometimes see a rising share price when a few big institutions want to buy a certain stock at the same time. The history of earnings and revenue, which you can see below, could be helpful in considering if more institutional investors will want the stock. Of course, there are plenty of other factors to consider, too.

ASX:AV1 Income Statement, April 5th 2019
ASX:AV1 Income Statement, April 5th 2019

Hedge funds don’t have many shares in Adveritas. Our information suggests that there isn’t any analyst coverage of the stock, so it is probably little known.

Insider Ownership Of Adveritas

The definition of company insiders can be subjective, and does vary between jurisdictions. Our data reflects individual insiders, capturing board members at the very least. Company management run the business, but the CEO will answer to the board, even if he or she is a member of it.

I generally consider insider ownership to be a good thing. However, on some occasions it makes it more difficult for other shareholders to hold the board accountable for decisions.

Our most recent data indicates that insiders own a reasonable proportion of Adveritas Limited. Insiders have a AU$5.5m stake in this AU$25m business. It is great to see insiders so invested in the business. It might be worth checking if those insiders have been buying recently.

General Public Ownership

The general public — mostly retail investors — own 62% of Adveritas . This size of ownership gives retail investors collective power. They can and probably do influence decisions on executive compensation, dividend policies and proposed business acquisitions.

Private Company Ownership

Our data indicates that Private Companies hold 13%, of the company’s shares. It might be worth looking deeper into this. If related parties, such as insiders, have an interest in one of these private companies, that should be disclosed in the annual report. Private companies may also have a strategic interest in the company.

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.