In this article, I will take a quick look at MITCON Consultancy & Engineering Services Limited’s (NSE:MITCON) recent ownership structure – an unconventional investing subject, but an important one. The impact of a company’s ownership structure affects both its short- and long-term performance. 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 MITCON’s shareholders in more detail.
Institutional OwnershipWith an institutional ownership of 30.71%, MITCON 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. For shareholders in MITCON, sharp price movements may not be a major concern as active hedge funds hold a relatively small stake in the company. Although this doesn’t necessarily lead to high short-term volatility, we should dig deeper into MITCON’s ownership structure to find how the remaining owner types can affect its investment profile.
Insider OwnershipI find insiders are an important group of stakeholders, who are directly involved in making key decisions related to the use of capital. In essence, insider ownership is more about the alignment of shareholders’ interests with the management. MITCON insiders hold a significant stake of 19.77% in the company. This level of insider ownership has been found to have a negative impact on companies with consistently low PE ratios (underperformers), while it has been positive in the case of high PE ratio firms (outperformers). Another aspect of insider ownership is to learn about their recent transactions. Insiders buying company shares can be a positive indicator of future performance, but a selling decision can simply be driven by personal financial needs.
General Public OwnershipThe general public holds a substantial 30.41% stake in MITCON, making it a highly popular stock among retail investors. 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 Equity OwnershipPrivate equity firms hold a 19.11% stake in MITCON. With a stake of this size, they can be influential in key policy decisions. This is an encouraging sign for investors as these investors tend to be active strategist in companies, focusing on increasing operational and capital efficiency for the firm.
MITCON’s considerably high level of institutional ownership calls for further analysis into its margin of safety. This will allow investors to reduce the impact of non-fundamental factors, such as volatile block trading impact on their portfolio value. However, ownership structure should not be the only focus of your research when constructing an investment thesis around MITCON. Instead, you should be evaluating company-specific factors such as the intrinsic valuation, which is a key driver of MITCON Consultancy & Engineering Services’s share price. I urge you to complete your research by taking a look at the following:
- Future Outlook: What are well-informed industry analysts predicting for MITCON’s future growth? Take a look at our free research report of analyst consensus for MITCON’s outlook.
- Past Track Record: Has MITCON 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 MITCON’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 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.