In this article, I’m going to take a look at RHC Capital Corporation’s (TSXV:RHC) latest ownership structure, a non-fundamental factor which is important, but remains a less discussed subject among investors. Ownership structure of a company has been found to affect share performance over time. The effect of an active institutional investor with a similar ownership as a passive pension-fund can be vastly different on a company’s corporate governance and accountability to shareholders. While this may be more interesting for long-term investors, short-term investors can also benefit by paying attention to when these institutions trade in order to take advantage of the heightened volatility. Now I will analyze RHC’s shareholder registry in more detail.Check out our latest analysis for RHC Capital
Institutional OwnershipInstitutional investors transact in large blocks which can influence the momentum of stock prices, at least in the short-term, especially when there is a low level of public shares available on the market to trade. A low institutional ownership of 6.07% puts RHC on a list of companies that are not likely exposed to spikes in volatility resulting from institutional trading. Less covered stocks like RHC used to feature in legendary investor Peter Lynch’s portfolio, which would later be bought up by fast-following institutions as the stock gained more popularity.
Insider OwnershipI find insiders are another 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. RHC insiders hold a significant stake of 20.64% 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’s also interesting to learn what RHC insiders have been doing with their shareholdings 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 OwnershipA substantial ownership of 73.10% in RHC 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. 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 OwnershipPotential investors in RHC should also look at another important group of investors: private companies, with a stake of 0.19%, 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 RHC’s business strategy. Thus, investors not need worry too much about the consequences of these holdings.
Institutional ownership in RHC is not at a level that would concern investors. We are less likely to see sustained downtrends or significant volatility resulting from large institutional trading. However, ownership structure should not be the only focus of your research when constructing an investment thesis around RHC. Rather, you should be looking at fundamental drivers such as the intrinsic valuation, which is a key driver of RHC Capital’s share price. I highly recommend you to complete your research by taking a look at the following:
- 1. Financial Health: Is RHC’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 RHC 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 RHC’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.