In this article, I’m going to take a look at thyssenkrupp AG’s (ETR:TKA) 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. Therefore, I will take a look at TKA’s shareholders in more detail.
Institutional OwnershipTKA’s 43.33% 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. Considering hedge funds hold a stake of 12.23% in the company, TKA shares may experience high short-term volatility as this class of institutions are frequently found to sell significantly during market-wide shocks. We should dig deeper into the company’s ownership structure to find how the rest of its ownership structure can impact its investment case.
General Public OwnershipThe general public holds a substantial 44.44% stake in TKA, making it a highly popular stock among retail investors. 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 OwnershipAnother important group of owners for potential investors in TKA are private companies that hold a stake of 0.00092% in TKA. These are companies that are mainly invested due to their strategic interests or are incentivized by reaping capital gains on investments their shareholdings. However, an ownership of this size may be relatively insignificant, meaning that these shareholders may not have the potential to influence TKA’s business strategy. Thus, investors not need worry too much about the consequences of these holdings.
I suggest investors seek some degree of margin of safety due to high institutional ownership in TKA, in particular due to the strong presence of active hedge fund investors. This will allow an investor 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 TKA, ownership structure alone should not dictate your decision to buy or sell the stock. Instead, you should be evaluating company-specific factors such as the intrinsic valuation, which is a key driver of thyssenkrupp’s share price. I highly recommend you to complete your research by taking a look at the following:
- Future Outlook: What are well-informed industry analysts predicting for TKA’s future growth? Take a look at our free research report of analyst consensus for TKA’s outlook.
- Past Track Record: Has TKA 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 TKA’s historicals for more clarity.
- 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.
To help readers see past the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price-sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned. For errors that warrant correction please contact the editor at email@example.com.