In this article, I will take a quick look at Jindal Cotex Limited’s (NSE:JINDCOT) 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. Different types of investors can have varying degrees of influence on a company’s management team. For example, an active institutional investor may be more likely to hold a company accountable for certain actions whereas a passive fund will move in and out of stocks without regards to corporate governance. The implications of these institutions’ actions can either benefit or hinder individual investors, so it is important to understand the ownership composition of your stock investment. Therefore, it is beneficial for us to examine JINDCOT’s ownership structure in more detail.Check out our latest analysis for Jindal Cotex
Institutional OwnershipInstitutional investors typically buy and sell shares in large magnitudes which can significantly sway the share price, especially when there are relatively small amounts of shares available on the market to trade. With a not-so-big institutional ownership of 9.93%, JINDCOT is not too exposed to price volatility that may arise from institutional trading. But another factor to consider is the presence of hedge funds, who are notorious for active investing. In JINDCOT’s case, they make up 9.94% of ownership, indicating potential sharp stock price movements during significant transactions. However, I would also examine the rest of its ownership structure in more detail to determine how the company’s major shareholders can affect its investment case.
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. 36.00% ownership of JINDCOT 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 OwnershipThe general public holds a substantial 35.66% stake in JINDCOT, making it a highly popular stock among retail investors. This level of ownership gives retail investors the power to sway key policy decisions such as board composition, executive compensation, and potential acquisitions. This is a positive sign for an investor who wants to be involved in key decision-making of the company.
Private Company OwnershipAnother important group of owners for potential investors in JINDCOT are private companies that hold a stake of 8.46% in JINDCOT. These are companies that are mainly invested due to their strategic interests or are incentivized by reaping capital gains on investments their shareholdings. With this size of ownership in JINDCOT, this ownership class can affect the company’s business strategy. As a result, potential investors should further explore the company’s business relations with these companies and find out if they can affect shareholder returns in the long-term.
Although JINDCOT has a low level of overall institutional ownership, active hedge funds still have a significant stake in the company. Their ownership is a non-fundamental factor, which can impact JINDCOT’s price volatility in the short-term, considering this group investors may come under pressure to deliver in the short term. An investment in JINDCOT should come with enough margin of safety in order to avoid significant dips in shareholding value. However, ownership structure should not be the only determining factor when you’re building an investment thesis for JINDCOT. Rather, you should be looking at fundamental drivers such as the intrinsic valuation, which is a key driver of Jindal Cotex’s share price. I urge you to complete your research by taking a look at the following:
- Financial Health: Is JINDCOT’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.
- Past Track Record: Has JINDCOT 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 JINDCOT’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.