I am going to take a deep dive into Opal Luxury Time Products Limited’s (NSEI:OPAL) most recent ownership structure, not a frequent subject of discussion among individual investors. The impact of a company’s ownership structure affects both its short- and long-term performance. 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. Therefore, I will take a look at OPAL’s shareholders in more detail.See our latest analysis for Opal Luxury Time Products
Institutional OwnershipIn OPAL’s case, institutional ownership stands at 35.68%, significant enough to cause considerable price moves in the case of large institutional transactions, especially when there is a low level of public 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 OPAL, 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 OPAL’s ownership structure to find how the remaining owner types can affect its investment profile.
Insider OwnershipI find insiders are another 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. OPAL insiders hold a significant stake of 31.23% 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 OwnershipWith 2.52% ownership, the general public are a relatively smaller ownership class in OPAL. This size of ownership, while considerably small for a public company, may not be enough to change company policy if the decision is not in sync with other large shareholders.
Private Equity OwnershipPrivate equity firms hold a 30.57% stake in OPAL. With a stake of this size, they can be influential in key policy decisions. This is a positive sign for potential investors as these firms play an important role in aligning company policy with shareholder returns.
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 enable shareholders to comfortably invest in the company while avoid getting trapped in a sustained sell-off that is often observed in stocks with this level of institutional participation. However, ownership structure should not be the only focus of your research when constructing an investment thesis around OPAL. Rather, you should be examining fundamental factors such as the intrinsic valuation, which is a key driver of Opal Luxury Time Products’s share price. I urge you to complete your research by taking a look at the following:
- 1. Financial Health: Is OPAL’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 OPAL 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 OPAL’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.