Who Are The Top Investors In Elecosoft plc (LON:ELCO)?

In this analysis, my focus will be on developing a perspective on Elecosoft plc’s (AIM:ELCO) latest ownership structure, a less discussed, but important factor. Ownership structure of a company has been found to affect share performance over time. 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 ELCO's shareholder registry in more detail.

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Institutional Ownership

With an institutional ownership of 56.26%, ELCO 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 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. Hedge funds, considered active investors, hold a 15.04% stake in the company, which may be the cause of high short-term volatility in the stock price. I am going to further examine ELCO's ownership structure to check how other major shareholders can affect its investment case.

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. A major group of owners of ELCO is individual insiders, sitting with a hefty 30.11% 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). Another aspect of insider ownership is to learn about their recent transactions. Insider buying may be a sign of upbeat future expectations, however, selling doesn't necessarily mean the opposite as insiders may be motivated by their personal financial needs.

Next Steps:

I suggest investors seek some degree of margin of safety due to high institutional ownership in ELCO, in particular due to the strong presence of active hedge fund investors. This may enable shareholders to comfortably invest in the company and avoid getting trapped in a sustained sell-off that is often observed in stocks with this level of institutional participation. However, if you are building an investment case for ELCO, ownership structure alone should not dictate your decision to buy or sell the stock. Rather, you should be looking at fundamental drivers such as Elecosoft's past track record and financial health. I highly recommend you to complete your research by taking a look at the areas below. Just a heads up - to access some parts of the Simply Wall St research tool you might be asked to create a free account, but it takes just one click and the information they provide is definitely worth it in my opinion.

• 1. Future Outlook: What are well-informed industry analysts predicting for ELCO’s future growth? Take a look at this free research report of analyst consensus for ELCO’s outlook.
• 2. Past Track Record: Has ELCO 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 ELCO's historicals for more clarity.
• 3. Other High-Performing Stocks: Are there other stocks that provide better prospects with proven track records? Explore a 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.

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Simply Wall St analyst Simply Wall St and Simply Wall St have no position in any of the companies mentioned. This article is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.