In this article, I’m going to take a look at Northamber plc’s (AIM:NAR) latest ownership structure, a non-fundamental factor which is important, but remains a less discussed subject among investors. 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. Now I will analyze NAR’s shareholder registry in more detail.See our latest analysis for Northamber
Institutional OwnershipNAR’s 22.00% 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. However, as not all institutions are alike, such high volatility events, especially in the short-term, have been more frequently linked to active market participants like hedge funds. In the case of NAR, investors need not worry about such volatility considering active hedge funds don’t have a significant stake. However, we should dig deeper into NAR’s ownership structure and find out how other key ownership classes can affect its investment profile.
Insider OwnershipInsiders form another group of important ownership types as they manage the company’s operations and decide the best use of capital. Insider ownership has been linked to better alignment between management and shareholders. 68.37% ownership of NAR insiders is large enough to make an impact on shareholder returns. In general, this level of insider ownership has negatively affected underperforming (consistently low PE ratio) companies and positively affected the companies that outperform (consistently high PE ratio). It may be interesting to take a look at what company insiders have been doing with their holdings 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 OwnershipWith 6.31% ownership, the general public are also an important ownership class in NAR. While this size of ownership may not be enough to sway a policy decision in their favour, they can still make a collective impact on company policies if it aligns with other large shareholders.
Private Company OwnershipPotential investors in NAR should also look at another important group of investors: private companies, with a stake of 3.32%, who are primarily invested because of strategic and capital gain interests. However, an ownership of this size may be relatively insignificant, meaning that these shareholders may not have the potential to influence NAR’s business strategy. Thus, investors not need worry too much about the consequences of these holdings.
What this means for you:
The company’s high institutional ownership makes margin of safety a very important consideration to existing investors since long bull and bear trends often emerge when these big-ticket investors see a change in long-term potential of the company. This will allow investors 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 NAR, 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 Northamber’s share price. I urge you to complete your research by taking a look at the following:
- 1. Financial Health: Is NAR’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 NAR 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 NAR’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.