What You Must Know About Onex Corporation's (TSE:ONEX) Major Investors

By
Simply Wall St
Published
July 13, 2018
TSX:ONEX
Source: Shutterstock

In this article, I'm going to take a look at Onex Corporation’s (TSE:ONEX) latest ownership structure, a non-fundamental factor which is important, but remains a less discussed subject among investors. Ownership structure has been found to have an impact on shareholder returns in both short- and long-term. 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 ONEX's ownership structure in more detail.

See our latest analysis for Onex
TSX:ONEX Ownership_summary July 13th 18
TSX:ONEX Ownership_summary July 13th 18

Institutional Ownership

Institutions account for 41.08% of ONEX's outstanding shares, a significant enough holding to move stock prices if they start buying and selling in large quantities, especially when there are relatively small amounts of shares available on the market to trade. Although ONEX has a high institutional ownership, such stock moves, in the short-term, are more commonly linked to a particular type of active institutional investors – hedge funds. In the case of ONEX, investors need not worry about such volatility considering active hedge funds don't have a significant stake. However, we should dig deeper into ONEX's ownership structure and find out how other key ownership classes can affect its investment profile.

Insider Ownership

I find insiders are an 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. 16.98% ownership of ONEX 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). It may be interesting to take a look at what company insiders have been doing with their holdings lately. Insider buying may be a sign of upbeat future expectations, however, selling doesn't necessarily mean the opposite as insiders may be motivated by their personal financial needs.

General Public Ownership

A big stake of 40.67% in ONEX is held by the general public. This level of ownership gives retail investors the power to sway key policy decisions such as board composition, executive compensation, and potential acquisitions. This is a positive sign for an investor who wants to be involved in key decision-making of the company.

Private Company Ownership

Another group of owners that a potential investor in ONEX should consider are private companies, with a stake of 1.27%. 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 ONEX's business strategy. Thus, investors not need worry too much about the consequences of these holdings.

Next Steps:

ONEX's considerably high level of institutional ownership calls for further analysis into its margin of safety. This will enable shareholders to comfortably invest in the company while avoid getting trapped in a sustained sell-off that is often observed in stocks with this level of institutional participation. However, if you are building an investment case for ONEX, ownership structure alone should not dictate your decision to buy or sell the stock. Rather, you should be looking at fundamental drivers such as the intrinsic valuation, which is a key driver of Onex’s share price. I urge you to complete your research by taking a look at the following:

  1. Financial Health: Is ONEX’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 ONEX 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 ONEX'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.
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.

Simply Wall St analyst Simply Wall St and Simply Wall St have no position in any of the companies mentioned. This article is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.

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