Every investor in National Tyre & Wheel Limited (ASX:NTD) should be aware of the most powerful shareholder groups. 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.
With a market capitalization of AU$38m, National Tyre & Wheel is a small cap stock, so it might not be well known by many institutional investors. Our analysis of the ownership of the company, below, shows that institutions own shares in the company. We can zoom in on the different ownership groups, to learn more about National Tyre & Wheel.
What Does The Institutional Ownership Tell Us About National Tyre & Wheel?
Many institutions measure their performance against an index that approximates the local market. So they usually pay more attention to companies that are included in major indices.
National Tyre & Wheel already has institutions on the share registry. Indeed, they own 29% of the company. This suggests some credibility amongst professional investors. But we can’t rely on that fact alone, since institutions make bad investments sometimes, just like everyone does. If multiple institutions change their view on a stock at the same time, you could see the share price drop fast. It’s therefore worth looking at National Tyre & Wheel’s earnings history, below. Of course, the future is what really matters.
We note that hedge funds don’t have a meaningful investment in National Tyre & Wheel. Because actions speak louder than words, we consider it a good sign when insiders own a significant stake in a company. In National Tyre & Wheel’s case, its Top Key Executive, Terence Smith, is the largest shareholder, holding 27% of shares outstanding. With 7.1% and 5.5% of the shares outstanding respectively, Forager Funds Management Pty Ltd. and Spheria Asset Management Pty Ltd are the second and third largest shareholders.
On further inspection, we found that 53% of the share register is owned by the top 6 shareholders, suggesting that the interests of the larger shareholders are balanced out to an extent by the smaller ones.
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 is some analyst coverage of the stock, but it could still become more well known, with time.
Insider Ownership Of National Tyre & Wheel
While the precise definition of an insider can be subjective, almost everyone considers board members to be insiders. Management ultimately answers to the board. However, it is not uncommon for managers to be executive board members, especially if they are a founder or the CEO.
Insider ownership is positive when it signals leadership are thinking like the true owners of the company. However, high insider ownership can also give immense power to a small group within the company. This can be negative in some circumstances.
It seems insiders own a significant proportion of National Tyre & Wheel Limited. It has a market capitalization of just AU$38m, and insiders have AU$15m worth of shares in their own names. This may suggest that the founders still own a lot of shares. You can click here to see if they have been buying or selling.
General Public Ownership
The general public, with a 26% stake in the company, will not easily be ignored. 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 4.4%, of the shares on issue. It’s hard to draw any conclusions from this fact alone, so its worth looking into who owns those private companies. Sometimes insiders or other related parties have an interest in shares in a public company through a separate private company.
I find it very interesting to look at who exactly owns a company. But to truly gain insight, we need to consider other information, too. Take risks, for example – National Tyre & Wheel has 4 warning signs we think you should be aware of.
If you are like me, you may want to think about whether this company will grow or shrink. Luckily, you can check this free report showing analyst forecasts for its future.
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.
If you spot an error that warrants correction, please contact the editor at email@example.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.
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