In this article, I will take a quick look at Técnicas Reunidas SA’s (BME:TRE) recent ownership structure – an unconventional investing subject, but an important one. Ownership structure of a company has been found to affect share performance over time. Differences in ownership structure of companies can have a profound effect on how management’s incentives are aligned with shareholder returns, and whether they adhere to corporate governance best practices. Although this is an important factor for long-term investors, many investors can also be impacted by institutional presence and their high-volume trading. Therefore, I will take a look at TRE’s shareholders in more detail.
Institutional OwnershipIn TRE’s case, institutional ownership stands at 19.83%, significant enough to cause considerable price moves in the case of large institutional transactions, especially when there is a low level of public shares available on the market to trade. Although TRE 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 TRE, investors need not worry about such volatility considering active hedge funds don’t have a significant stake. However, we should dig deeper into TRE’s ownership structure and find out how other key ownership classes can affect its investment profile.
Insider OwnershipAn 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. TRE insiders hold a not-so-significant 3.32% stake in the company, which somewhat aligns their interests with that of shareholders. However, a higher level of insider ownership has been linked to management executing on high-returning projects instead of expansion projects for the sake of apparent growth. In addition to this, it may be interesting to look at insider buying and selling activities. Keep in mind that buying may be sign of upbeat future expectations, but selling doesn’t necessarily mean the opposite as the insiders might just be doing it out of their personal financial needs.
General Public OwnershipA substantial ownership of 39.75% in TRE is held by the general public. 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.
Private Company OwnershipAnother important group of owners for potential investors in TRE are private companies that hold a stake of 37.11% in TRE. These are companies that are mainly invested due to their strategic interests or are incentivized by reaping capital gains on investments their shareholdings. An ownership of this size indicates a strong financial backing and has the potential to influence TRE’s business strategy. Thus, investors should dig deeper into TRE’s business relations with these companies and how it can affect shareholder returns in the long-term.
TRE’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 TRE. Rather, you should be looking at fundamental drivers such as Técnicas Reunidas’s past track record and financial health. 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 TRE’s future growth? Take a look at our free research report of analyst consensus for TRE’s outlook.
- Past Track Record: Has TRE 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 TRE’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.
To help readers see pass 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 firstname.lastname@example.org.