Today, I will be analyzing Asta Funding Inc’s (NASDAQ:ASFI) recent ownership structure, an important but not-so-popular subject among individual investors. Ownership structure of a company has been found to affect share performance over time. Differences in ownership structure of companies can have a profound effect on how management’s incentives are aligned with shareholder returns, and whether they adhere to corporate governance best practices. Although this is an important factor for long-term investors, many investors can also be impacted by institutional presence and their high-volume trading. Therefore, it is beneficial for us to examine ASFI’s ownership structure in more detail.View our latest analysis for Asta Funding
Institutional OwnershipInstitutional investors transact in large blocks which can influence the momentum of stock prices, at least in the short-term, especially when there is a low level of public shares available on the market to trade. With a not-so-big institutional ownership of 9.49%, ASFI is not too exposed to price volatility that may arise from institutional trading. Another important owner type is hedge funds, who tend to be investors with short-term horizons. With 6.04% ownership in ASFI, they seem to have a significant enough holding to cause a spike in volatility in the short run. However, I would explore its ownership registry in more detail to check how other ownership types affect its investment case for the long-term investor.
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 ASFI is individual insiders, sitting with a hefty 61.48% 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). 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 OwnershipThe general public holds a substantial 10.29% stake in ASFI, making it a highly popular stock among retail investors. This size of ownership gives retail investors collective power in deciding on major policy decisions such as executive compensation, appointment of directors and acquisitions of businesses. This level of ownership gives retail investors the power to sway key policy decisions such as board composition, executive compensation, and potential acquisitions. This is a positive sign for an investor who wants to be involved in key decision-making of the company.
Private Company OwnershipPotential investors in ASFI should also look at another important group of investors: private companies, with a stake of 12.71%, who are primarily invested because of strategic and capital gain interests. This kind of ownership, if predominantly strategic, can give these companies a significant power to affect ASFI’s business strategy. Thus, potential investors should look into these business relations and check how it can impact long-term shareholder returns.
While ASFI has a low level of institutional ownership, active hedge funds still hold a significant stake in the company. The participation of these active investors has been linked to the volatile nature of share prices. It is important that ASFI offers enough margin of safety in order to avoid a significant portfolio impact resulting from a sustained sell-off and drop in share value. However, if you are building an investment case for ASFI, ownership structure alone should not dictate your decision to buy or sell the stock. Instead, you should be evaluating company-specific factors such as Asta Funding’s past track record and financial health. I highly recommend you to complete your research by taking a look at the areas below. Just a heads up – to access some parts of the Simply Wall St research tool you might be asked to create a free account, but it takes just one click and the information they provide is definitely worth it in my opinion.
- 1. Financial Health: Is ASFI’s operations financially sustainable? Balance sheets can be hard to analyze, which is why Simply Wall St does it for us. Check out important financial health checks here.
- 2. Past Track Record: Has ASFI 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 ASFI’s historicals for more clarity.
- 3. Other High-Performing Stocks: Are there other stocks that provide better prospects with proven track records? Explore a free list of these great stocks here.