In this article, I will take a quick look at Hamon & Cie (International) SA’s (EBR:HAMO) recent ownership structure – an unconventional investing subject, but an important one. The impact of a company’s ownership structure affects both its short- and long-term performance. Differences in ownership structure of companies can have a profound effect on how management’s incentives are aligned with shareholder returns, and whether they adhere to corporate governance best practices. Although this is an important factor for long-term investors, many investors can also be impacted by institutional presence and their high-volume trading. Therefore, it is beneficial for us to examine HAMO’s ownership structure in more detail.
Institutional OwnershipWith an institutional ownership of 15.18%, HAMO 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 These moves, at least in the short-term, are generally observed in an institutional ownership mix comprising of active stock pickers, in particular levered hedge funds, which can cause large price swings. For shareholders in HAMO, sharp price movements may not be a major concern as active hedge funds hold a relatively small stake in the company. Although this doesn’t necessarily lead to high short-term volatility, we should dig deeper into HAMO’s ownership structure to find how the remaining owner types can affect its 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. With a minor stake in HAMO, insiders seem to have some alignment of interest with shareholders. A higher level of insider ownership has been found to reflect the choosing of projects with higher return on investments compared to lower returning projects for the sake of expansion. It would also be interesting to check what insiders have been doing with their shareholding recently. Insider buying can be a positive indicator of future performance, but a selling decision can be simply driven by personal financial requirements.
General Public OwnershipThe general public holds a substantial 19.25% stake in HAMO, making it a highly popular stock among retail investors. This size of ownership gives retail investors collective power in deciding on major policy decisions such as executive compensation, appointment of directors and acquisitions of businesses.
Private Company OwnershipAnother group of owners that a potential investor in HAMO should consider are private companies, with a stake of 65.57%. 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 HAMO, 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, ownership structure should not be the only focus of your research when constructing an investment thesis around HAMO. Rather, you should be looking at fundamental drivers such as Hamon & Cie (International)’s past track record and financial health. I highly recommend you to complete your research by taking a look at the following:
- Financial Health: Is HAMO’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 HAMO 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 HAMO’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.
To help readers see past the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price-sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned. For errors that warrant correction please contact the editor at email@example.com.