Every investor in Solution Dynamics Limited (NZSE:SDL) should be aware of the most powerful shareholder groups. Institutions will often hold stock in bigger companies, and we expect to see insiders owning a noticeable percentage of the smaller ones. Warren Buffett said that he likes ‘a business with enduring competitive advantages that is run by able and owner-oriented people’. So it’s nice to see some insider ownership, because it may suggest that management is owner-oriented.
With a market capitalization of NZ$24m, Solution Dynamics is a small cap stock, so it might not be well known by many institutional investors. In the chart below below, we can see that institutions own shares in the company. We can zoom in on the different ownership groups, to learn more about SDL.
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What Does The Institutional Ownership Tell Us About Solution Dynamics?
Many institutions measure their performance against an index that approximates the local market. So they usually pay more attention to companies that are included in major indices.
Solution Dynamics already has institutions on the share registry. Indeed, they own 36% of the company. 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. If multiple institutions change their view on a stock at the same time, you could see the share price drop fast. It’s therefore worth looking at Solution Dynamics’s earnings history, below. Of course, the future is what really matters.
Solution Dynamics is not owned by hedge funds. As far I can tell there isn’t analyst coverage of the company, so it is probably flying under the radar.
Insider Ownership Of Solution Dynamics
The definition of an insider can differ slightly between different countries, but members of the board of directors always count. The company management answer to the board; and the latter should represent the interests of shareholders. Notably, sometimes top-level managers are on the board, themselves.
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 information suggests that insiders maintain a significant holding in Solution Dynamics Limited. Insiders own NZ$8.3m worth of shares in the NZ$24m company. I would say this shows alignment with shareholders, but it is worth noting that the company is still quite small; some insiders may have founded the business. You can click here to see if those insiders have been buying or selling.
General Public Ownership
The general public holds a 29% stake in SDL. This size of ownership, while considerable, may not be enough to change company policy if the decision is not in sync with other large shareholders.
While it is well worth considering the different groups that own a company, there are other factors that are even more important.
I like to dive deeper into how a company has performed in the past. You can find historic revenue and earnings in this detailed graph.
Of course this may not be the best stock to buy. Therefore, you may wish to see our free collection of interesting prospects boasting favorable financials.
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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