In this article, I will take a quick look at Northern Superior Resources Inc’s (TSXV:SUP) 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. 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, it is beneficial for us to examine SUP’s ownership structure in more detail.See our latest analysis for Northern Superior Resources
Institutional OwnershipInstitutional investors typically buy and sell shares in large magnitudes which can significantly sway the share price, especially when there are relatively small amounts of shares available on the market to trade. With an institutional ownership of 3.76%, SUP doesn’t seem too exposed to higher volatility resulting from institutional trading. Stocks with low coverage such as SUP, attracts renowned investor Peter Lynch, who has benefited from the momentum of institutions buying into a stock as it gained 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. A major group of owners of SUP is individual insiders, sitting with a hefty 14.28% stake in the company. Broadly, insider ownership of this level has been found to negatively affect companies with consistently low PE ratio (underperforming). And a positive impact has been seen on companies with a high PE ratio (outperforming). It’s also interesting to learn what SUP 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 big stake of 80.05% in SUP 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.
Public Company OwnershipAnother important group of owners for potential investors in SUP are other public companies that hold a stake of 1.91% in SUP. These are the companies that are mainly invested due to their strategic interests or incentivized by reaping capital gains on investments. However, an ownership of this size may be relatively insignificant, meaning that these shareholders may not have the potential to influence SUP’s business strategy. Thus, investors not need worry too much about the consequences of these holdings.
What this means for you:
Institutional ownership level and composition in SUP is not high nor active enough to significantly impact its investment thesis. However, if you are building an investment case for SUP, ownership structure alone should not dictate your decision to buy or sell the stock. Rather, you should be examining fundamental factors such as Northern Superior Resources’s past track record and financial health. I urge you to complete your research by taking a look at the following:
1. Financial Health: Is SUP’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 SUP 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 SUP’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.