In this article, I will take a quick look at Pyne Gould Corporation Limited’s (NZSE:PGC) recent ownership structure – an unconventional investing subject, but an important one. When it comes to ownership structure of a company, the impact has been observed in both the long-and short-term performance of shares. 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 PGC’s shareholders in more detail.Check out our latest analysis for Pyne Gould
Institutional OwnershipInstitutional investors are one of the largest group of market participants and their buy-sell decisions on a company’s stock can significantly impact prices, more so, when there are relatively small amounts of shares available on the market to trade. A low institutional ownership of 4.95% puts PGC on a list of companies that are not likely exposed to spikes in volatility resulting from institutional trading. Less covered stocks like PGC used to feature in legendary investor Peter Lynch’s portfolio, which would later be bought up by fast-following institutions as the stock gained more popularity.
Insider OwnershipAnother important group of shareholders are company insiders. Insider ownership has to do more with how the company is managed and less to do with the direct impact of the magnitude of shares trading on the market. PGC insiders hold a significant stake of 83.42% 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). It’s also interesting to learn what PGC insiders have been doing with their shareholdings lately. Insider buying may be a sign of upbeat future expectations, however, selling doesn’t necessarily mean the opposite as insiders may be motivated by their personal financial needs.
General Public OwnershipA big stake of 10.72% in PGC is held by the general public. 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 Company OwnershipAnother group of owners that a potential investor in PGC should consider are private companies, with a stake of 0.91%. While they invest more often due to strategic interests, an investment can also be driven by capital gains through share price appreciation. However, an ownership of this size may be relatively insignificant, meaning that these shareholders may not have the potential to influence PGC’s business strategy. Thus, investors not need worry too much about the consequences of these holdings.
What this means for you:
With a low level of institutional ownership, investors in PGC need not worry about non-fundamental factors such as ownership structure causing large impact on stock prices. However, if you are building an investment case for PGC, ownership structure alone should not dictate your decision to buy or sell the stock. Instead, you should be evaluating company-specific factors such as the intrinsic valuation, which is a key driver of Pyne Gould’s share price. I highly recommend you to complete your research by taking a look at the following:
1. Financial Health: Is PGC’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 PGC 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 PGC’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.