Why Kingsland Energy Corp’s (CVE:KLE.H) Investor Composition Impacts Your Returns

In this article, I will take a quick look at Kingsland Energy Corp’s (CVE:KLE.H) recent ownership structure – an unconventional investing subject, but an important one. Ownership structure has been found to have an impact on shareholder returns in both short- and long-term. The same amount of capital coming from an activist institution and a passive mutual fund has different implications on corporate governance, which is a decisive factor for a long-term investor. It also impacts the trading environment of company shares, which is more of a concern for short-term investors. Therefore, it is beneficial for us to examine KLE.H’s ownership structure in more detail.

View out our latest analysis for Kingsland Energy
TSXV:KLE.H Ownership_summary July 12th 18
TSXV:KLE.H Ownership_summary July 12th 18

Institutional Ownership

With an institutional ownership of 20.30%, KLE.H 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 Although KLE.H 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. For KLE.H shareholders, the potential of this type of share price volatility shouldn’t be as concerning as hedge fund ownership is is not significant,indicating few chances of such sudden price moves. While that hardly seems concerning, I will explore further into KLE.H’s ownership type to find out how it can affect the company’s investment profile.

Insider Ownership

Insiders 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. KLE.H insiders hold a significant stake of 11.33% in the company. This level of insider ownership has been found to have a negative impact on companies with consistently low PE ratios (underperformers), while it has been positive in the case of high PE ratio firms (outperformers). It may be interesting to take a look at what company insiders have been doing with their holdings lately. While insider buying is possibly a sign of a positive outlook for the company, selling doesn’t necessarily indicate a negative outlook as they may be selling to meet personal financial needs.

General Public Ownership

A substantial ownership of 66.99% in KLE.H is held by the general public. 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 Ownership

Potential investors in KLE.H should also look at another important group of investors: other public companies, with a stake of 1.38%, who are primarily invested because of strategic and capital gain interests. However, an ownership of this size may be relatively insignificant, meaning that these shareholders may not have the potential to influence KLE.H’s business strategy. Thus, investors not need worry too much about the consequences of these holdings.

Next Steps:

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, if you are building an investment case for KLE.H, ownership structure alone should not dictate your decision to buy or sell the stock. Instead, you should be evaluating company-specific factors such as Kingsland Energy’s past track record and financial health. I highly recommend you to complete your research by taking a look at the following:

  1. Financial Health: Is KLE.H’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 KLE.H 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 KLE.H’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.