Do Insiders Own Lots Of Shares In Castro Model Ltd. (TLV:CAST)?

By
Simply Wall St
Published
August 16, 2021
TASE:CAST
Source: Shutterstock

Every investor in Castro Model Ltd. (TLV:CAST) should be aware of the most powerful shareholder groups. Insiders often own a large chunk of younger, smaller, companies while huge companies tend to have institutions as shareholders. Warren Buffett said that he likes "a business with enduring competitive advantages that is run by able and owner-oriented people." So it's nice to see some insider ownership, because it may suggest that management is owner-oriented.

Castro Model is not a large company by global standards. It has a market capitalization of ₪720m, which means it wouldn't have the attention of many institutional investors. In the chart below, we can see that institutions are noticeable on the share registry. Let's take a closer look to see what the different types of shareholders can tell us about Castro Model.

See our latest analysis for Castro Model

ownership-breakdown
TASE:CAST Ownership Breakdown August 17th 2021

What Does The Institutional Ownership Tell Us About Castro Model?

Institutions typically measure themselves against a benchmark when reporting to their own investors, so they often become more enthusiastic about a stock once it's included in a major index. We would expect most companies to have some institutions on the register, especially if they are growing.

Castro Model already has institutions on the share registry. Indeed, they own a respectable stake in the company. This can indicate that the company has a certain degree of credibility in the investment community. However, it is best to be wary of relying on the supposed validation that comes with institutional investors. They too, get it wrong sometimes. It is not uncommon to see a big share price drop if two large institutional investors try to sell out of a stock at the same time. So it is worth checking the past earnings trajectory of Castro Model, (below). Of course, keep in mind that there are other factors to consider, too.

earnings-and-revenue-growth
TASE:CAST Earnings and Revenue Growth August 17th 2021

Hedge funds don't have many shares in Castro Model. Rotter Holdings Ltd. is currently the company's largest shareholder with 23% of shares outstanding. Meanwhile, the second and third largest shareholders, hold 9.3% and 8.7%, of the shares outstanding, respectively.

On looking further, we found that 55% of the shares are owned by the top 5 shareholders. In other words, these shareholders have a meaningful say in the decisions of the company.

While it makes sense to study institutional ownership data for a company, it also makes sense to study analyst sentiments to know which way the wind is blowing. As far I can tell there isn't analyst coverage of the company, so it is probably flying under the radar.

Insider Ownership Of Castro Model

The definition of an insider can differ slightly between different countries, but members of the board of directors always count. Management ultimately answers to the board. However, it is not uncommon for managers to be executive board members, especially if they are a founder or the CEO.

Insider ownership is positive when it signals leadership are thinking like the true owners of the company. However, high insider ownership can also give immense power to a small group within the company. This can be negative in some circumstances.

Our information suggests that insiders own more than half of Castro Model Ltd.. This gives them effective control of the company. That means they own ₪364m worth of shares in the ₪720m company. That's quite meaningful. Most would argue this is a positive, showing strong alignment with shareholders. You can click here to see if those insiders have been buying or selling.

General Public Ownership

With a 11% ownership, the general public have some degree of sway over Castro Model. This size of ownership, while considerable, may not be enough to change company policy if the decision is not in sync with other large shareholders.

Private Company Ownership

We can see that Private Companies own 30%, of the shares on issue. It might be worth looking deeper into this. If related parties, such as insiders, have an interest in one of these private companies, that should be disclosed in the annual report. Private companies may also have a strategic interest in the company.

Next Steps:

It's always worth thinking about the different groups who own shares in a company. But to understand Castro Model better, we need to consider many other factors. Take risks for example - Castro Model has 3 warning signs (and 1 which is a bit concerning) we think you should know about.

Of course this may not be the best stock to buy. So take a peek at this free free list of interesting companies.

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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