Why Sage Gold Inc’s (CVE:SGX) Investor Composition Impacts Your Returns

Today, I will be analyzing Sage Gold Inc’s (TSXV:SGX) recent ownership structure, an important but not-so-popular subject among individual investors. Ownership structure of a company has been found to affect share performance over time. 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. Now I will analyze SGX’s shareholder registry in more detail.

Check out our latest analysis for Sage Gold
TSXV:SGX Ownership_summary Apr 21st 18
TSXV:SGX Ownership_summary Apr 21st 18

Institutional Ownership

SGX’s 17.24% 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. These moves, at least in the short-term, are generally observed in an institutional ownership mix comprising of active stock pickers, in particular levered hedge funds, which can cause large price swings. For SGX 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 SGX’s ownership type to find out how it can affect the company’s investment profile.

Insider Ownership

Another 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. 8.48% ownership makes insiders an important shareholder group. An insider stake of this level indicates that executives are highly aligned with the shareholders as both stand to gain when the value of the company rises. However, it would be interesting to take a look at their buying and selling activities lately. Buying may be sign of upbeat future expectations, but selling doesn’t necessarily mean the opposite as the insiders may be motivated by financial needs or they are simply diversifying their risk.

General Public Ownership

A substantial ownership of 74.28% in SGX 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.

Next Steps:

SGX’s considerably high level of institutional ownership calls for further analysis into its margin of safety. This will allow investors to reduce the impact of non-fundamental factors, such as volatile block trading impact on their portfolio value. However, ownership structure should not be the only focus of your research when constructing an investment thesis around SGX. Rather, you should be looking at fundamental drivers such as the intrinsic valuation, which is a key driver of Sage Gold’s share price. I highly recommend you to complete your research by taking a look at the following:

  1. Financial Health: Is SGX’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 SGX 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 SGX’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.