In this article, I’m going to take a look at Continental Gold Inc’s (TSX:CNL) latest ownership structure, a non-fundamental factor which is important, but remains a less discussed subject among investors. A company’s ownership structure is often linked to its share performance in both the long- and short-term. 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 CNL’s shareholder registry in more detail.Check out our latest analysis for Continental Gold
Institutional OwnershipWith an institutional ownership of 42.67%, CNL 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 CNL 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 CNL, investors need not worry about such volatility considering active hedge funds don’t have a significant stake. However, we should dig deeper into CNL’s ownership structure and find out how other key ownership classes can affect its investment profile.
Insider OwnershipAnother important group of shareholders are company insiders. Insider ownership has to do more with how the company is managed and less to do with the direct impact of the magnitude of shares trading on the market. Although individuals in CNL hold only a 1.30% stake, it’s a good sign for shareholders as the company’s executives and directors have their incentives directly linked to the company’s performance. 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 36.17% stake in CNL, making it a highly popular stock among retail investors. With this size of ownership, retail investors can collectively play a role in major company policies that affect shareholders returns, including executive remuneration and the appointment of directors. They can also exercise the power to decline an acquisition or merger that may not improve profitability.
Public Company OwnershipAnother group of owners that a potential investor in CNL should consider are other public companies, with a stake of 19.85%. 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 CNL’s business strategy. Thus, investors should dig deeper into CNL’s business relations with these companies and how it can affect shareholder returns in the long-term.
CNL’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 determining factor when you’re building an investment thesis for CNL. Rather, you should be examining fundamental factors such as Continental Gold’s past track record and financial health. I urge you to complete your research by taking a look at the following:
- 1. Future Outlook: What are well-informed industry analysts predicting for CNL’s future growth? Take a look at our free research report of analyst consensus for CNL’s outlook.
- 2. Past Track Record: Has CNL 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 CNL’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.