I am going to take a deep dive into Enbridge Income Fund Holdings Inc’s (TSE:ENF) most recent ownership structure, not a frequent subject of discussion among individual investors. When it comes to ownership structure of a company, the impact has been observed in both the long-and short-term performance of shares. If an activist institution invests the same amount of capital in a stock as a passive long-term pension fund, the implications are potentially different for key corporate financing decisions such as the use of excess cash or the source of financing. While these are more of a long-term investor’s concern, short-term investors may find the impact of institutional trading overwhelming enough to lose out on what could be a potential opportunity. Therefore, I will take a look at ENF’s shareholders in more detail.
Institutional OwnershipENF’s 22.30% institutional ownership seems enough to cause large share price movements in the case of significant share sell-off or acquisitions by institutions, particularly when there is a low level of public shares available on the market to trade. However, as not all institutions are alike, such high volatility events, especially in the short-term, have been more frequently linked to active market participants like hedge funds. In the case of ENF, investors need not worry about such volatility considering active hedge funds don’t have a significant stake. However, we should dig deeper into ENF’s ownership structure and find out how other key ownership classes can affect its investment profile.
Insider OwnershipI 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. ENF insiders may only hold a a minor stake in the company, but this is a relatively significant holding given it is a large-cap stock. A higher level of insider ownership has been linked to management executing on high-returning projects instead of expansion projects for the sake of apparent growth. 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 57.08% stake in ENF, 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.
Public Company OwnershipAnother group of owners that a potential investor in ENF should consider are other public companies, with a stake of 19.87%. While they invest more often due to strategic interests, an investment can also be driven by capital gains through share price appreciation. An ownership of this size indicates a strong financial backing and has the potential to influence ENF’s business strategy. Thus, investors should dig deeper into ENF’s business relations with these companies and how it can affect shareholder returns in the long-term.
ENF’s considerably high level of institutional ownership calls for further analysis into its margin of safety. This is to avoid getting trapped in a sustained sell-off that is often observed in stocks with this level of institutional participation. However, ownership structure should not be the only focus of your research when constructing an investment thesis around ENF. Instead, you should be evaluating company-specific factors such as the intrinsic valuation, which is a key driver of Enbridge Income Fund Holdings’s share price. I highly recommend you to complete your research by taking a look at the following:
- Future Outlook: What are well-informed industry analysts predicting for ENF’s future growth? Take a look at our free research report of analyst consensus for ENF’s outlook.
- Past Track Record: Has ENF 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 ENF’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.