Every investor in Edelweiss Financial Services Limited (NSE:EDELWEISS) 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. I generally like to see some degree of insider ownership, even if only a little. As Nassim Nicholas Taleb said, 'Don’t tell me what you think, tell me what you have in your portfolio.
With a market capitalization of ₹56b, Edelweiss Financial Services is a small cap stock, so it might not be well known by many institutional investors. In the chart below, we can see that institutions own shares in the company. Let's delve deeper into each type of owner, to discover more about Edelweiss Financial Services.
What Does The Institutional Ownership Tell Us About Edelweiss Financial Services?
Institutional investors commonly compare their own returns to the returns of a commonly followed index. So they generally do consider buying larger companies that are included in the relevant benchmark index.
As you can see, institutional investors have a fair amount of stake in Edelweiss Financial Services. 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. When multiple institutions own a stock, there's always a risk that they are in a 'crowded trade'. When such a trade goes wrong, multiple parties may compete to sell stock fast. This risk is higher in a company without a history of growth. You can see Edelweiss Financial Services' historic earnings and revenue below, but keep in mind there's always more to the story.
It would appear that 6.9% of Edelweiss Financial Services shares are controlled by hedge funds. That catches my attention because hedge funds sometimes try to influence management, or bring about changes that will create near term value for shareholders. With a 17% stake, CEO Rashesh Shah is the largest shareholder. Meanwhile, the second and third largest shareholders, hold 7.9% and 6.9%, of the shares outstanding, respectively. Interestingly, the second-largest shareholder, Arakoni Ramaswamy is also Top Key Executive, again, pointing towards strong insider ownership amongst the company's top shareholders.
On further inspection, we found that more than half the company's shares are owned by the top 8 shareholders, suggesting that the interests of the larger shareholders are balanced out to an extent by the smaller ones.
Researching institutional ownership is a good way to gauge and filter a stock's expected performance. The same can be achieved by studying analyst sentiments. There are a reasonable number of analysts covering the stock, so it might be useful to find out their aggregate view on the future.
Insider Ownership Of Edelweiss Financial Services
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.
I generally consider insider ownership to be a good thing. However, on some occasions it makes it more difficult for other shareholders to hold the board accountable for decisions.
Our most recent data indicates that insiders own a reasonable proportion of Edelweiss Financial Services Limited. Insiders own ₹21b worth of shares in the ₹56b company. It is great to see insiders so invested in the business. It might be worth checking if those insiders have been buying recently.
General Public Ownership
The general public, with a 16% stake in the company, will not easily be ignored. While this group can't necessarily call the shots, it can certainly have a real influence on how the company is run.
Private Company Ownership
It seems that Private Companies own 8.6%, of the Edelweiss Financial Services stock. Private companies may be related parties. Sometimes insiders have an interest in a public company through a holding in a private company, rather than in their own capacity as an individual. While it's hard to draw any broad stroke conclusions, it is worth noting as an area for further research.
It's always worth thinking about the different groups who own shares in a company. But to understand Edelweiss Financial Services better, we need to consider many other factors. Case in point: We've spotted 3 warning signs for Edelweiss Financial Services you should be aware of.
If you would prefer discover what analysts are predicting in terms of future growth, do not miss this free report on analyst forecasts.
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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