Do Insiders Own Lots Of Shares In Hammond Power Solutions Inc. (TSE:HPS.A)?

By
Simply Wall St
Published
April 12, 2021
TSX:HPS.A
Source: Shutterstock

Every investor in Hammond Power Solutions Inc. (TSE:HPS.A) should be aware of the most powerful shareholder groups. Institutions will often hold stock in bigger companies, and we expect to see insiders owning a noticeable percentage of the smaller ones. 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.

Hammond Power Solutions is a smaller company with a market capitalization of CA$126m, so it may still be flying under the radar of many institutional investors. In the chart below, we can see that institutional investors have bought into the company. We can zoom in on the different ownership groups, to learn more about Hammond Power Solutions.

See our latest analysis for Hammond Power Solutions

ownership-breakdown
TSX:HPS.A Ownership Breakdown April 13th 2021

What Does The Institutional Ownership Tell Us About Hammond Power Solutions?

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.

As you can see, institutional investors have a fair amount of stake in Hammond Power Solutions. 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. It is not uncommon to see a big share price drop if two large institutional investors try to sell out of a stock at the same time. So it is worth checking the past earnings trajectory of Hammond Power Solutions, (below). Of course, keep in mind that there are other factors to consider, too.

earnings-and-revenue-growth
TSX:HPS.A Earnings and Revenue Growth April 13th 2021

Hammond Power Solutions is not owned by hedge funds. With a 33% stake, CEO William Hammond is the largest shareholder. Foyston, Gordon & Payne Inc. is the second largest shareholder owning 8.7% of common stock, and FMR LLC holds about 7.6% of the company stock.

On looking further, we found that 51% of the shares are owned by the top 5 shareholders. In other words, these shareholders have a meaningful say in the decisions of the company.

While studying institutional ownership for a company can add value to your research, it is also a good practice to research analyst recommendations to get a deeper understand of a stock's expected performance. We're not picking up on any analyst coverage of the stock at the moment, so the company is unlikely to be widely held.

Insider Ownership Of Hammond Power Solutions

While the precise definition of an insider can be subjective, almost everyone considers board members to be insiders. The company management answer to the board and the latter should represent the interests of shareholders. Notably, sometimes top-level managers are on the board themselves.

Most consider insider ownership a positive because it can indicate the board is well aligned with other shareholders. However, on some occasions too much power is concentrated within this group.

Our information suggests that insiders maintain a significant holding in Hammond Power Solutions Inc.. Insiders have a CA$44m stake in this CA$126m business. 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 holds a 48% stake in Hammond Power Solutions. While this group can't necessarily call the shots, it can certainly have a real influence on how the company is run.

Next Steps:

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. Consider for instance, the ever-present spectre of investment risk. We've identified 2 warning signs with Hammond Power Solutions , and understanding them should be part of your investment process.

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.

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