In this article, I will take a quick look at Jason Industries Inc’s (NASDAQ:JASN) recent ownership structure – an unconventional investing subject, but an important one. Ownership structure has been found to have an impact on shareholder returns in both short- and long-term. If an activist institution invests the same amount of capital in a stock as a passive long-term pension fund, the implications are potentially different for key corporate financing decisions such as the use of excess cash or the source of financing. While these are more of a long-term investor’s concern, short-term investors may find the impact of institutional trading overwhelming enough to lose out on what could be a potential opportunity. Therefore, it is beneficial for us to examine JASN’s ownership structure in more detail.See our latest analysis for Jason Industries
Institutional OwnershipJASN’s 17.75% institutional ownership seems enough to cause large share price movements in the case of significant share sell-off or acquisitions by institutions, particularly when there is a low level of public shares available on the market to trade. Although JASN has a high institutional ownership, such stock moves, in the short-term, are more commonly linked to a particular type of active institutional investors – hedge funds. With hedge funds holding a 30.18% stake in the company, its share price can experience heightened volatility. But I also examine other ownership types and their potential impact on JASN’s investment case.
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. A major group of owners of JASN is individual insiders, sitting with a hefty 18.51% stake in the company. Broadly, insider ownership of this level has been found to negatively affect companies with consistently low PE ratio (underperforming). And a positive impact has been seen on companies with a high PE ratio (outperforming). It may be interesting to take a look at what company insiders have been doing with their holdings lately. 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 OwnershipA substantial ownership of 33.56% in JASN 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.
What this means for you:
I suggest investors seek some degree of margin of safety due to high institutional ownership in JASN, in particular due to the strong presence of active hedge fund investors. This will allow an investor to reduce the impact of non-fundamental factors, such as volatile block trading impact on their portfolio value. However, if you are building an investment case for JASN, ownership structure alone should not dictate your decision to buy or sell the stock. Rather, you should be looking at fundamental drivers such as the intrinsic valuation, which is a key driver of Jason Industries’s share price. I highly recommend you to complete your research by taking a look at the following:
1. Financial Health: Is JASN’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. Valuation: What is JASN worth today? Is the stock undervalued, even when its growth outlook is factored into its intrinsic value? The intrinsic value infographic in our free research report helps visualize whether JASN is currently mispriced by the market.
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.