What Percentage Of Capital Southwest Corporation (NASDAQ:CSWC) Shares Do Insiders Own?

By
Simply Wall St
Published
May 20, 2021
NasdaqGS:CSWC
Source: Shutterstock

Every investor in Capital Southwest Corporation (NASDAQ:CSWC) should be aware of the most powerful shareholder groups. Institutions often own shares in more established companies, while it's not unusual to see insiders own a fair bit of smaller companies. I quite like to see at least a little bit of insider ownership. As Charlie Munger said 'Show me the incentive and I will show you the outcome.

Capital Southwest is not a large company by global standards. It has a market capitalization of US$493m, which means it wouldn't have the attention of many institutional investors. In the chart below, we can see that institutional investors have bought into the company. We can zoom in on the different ownership groups, to learn more about Capital Southwest.

Check out our latest analysis for Capital Southwest

ownership-breakdown
NasdaqGS:CSWC Ownership Breakdown May 21st 2021

What Does The Institutional Ownership Tell Us About Capital Southwest?

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.

Capital Southwest already has institutions on the share registry. Indeed, they own a respectable stake in the company. This implies the analysts working for those institutions have looked at the stock and they like it. But just like anyone else, they could be wrong. 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 Capital Southwest's earnings history below. Of course, the future is what really matters.

earnings-and-revenue-growth
NasdaqGS:CSWC Earnings and Revenue Growth May 21st 2021

Capital Southwest is not owned by hedge funds. SMH Asset Management is currently the company's largest shareholder with 4.1% of shares outstanding. In comparison, the second and third largest shareholders hold about 4.1% and 3.0% of the stock. Furthermore, CEO Bowen Diehl is the owner of 2.4% of the company's shares.

A deeper look at our ownership data shows that the top 25 shareholders collectively hold less than half of the register, suggesting a large group of small holders where no single shareholder has a majority.

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. Quite a few analysts cover the stock, so you could look into forecast growth quite easily.

Insider Ownership Of Capital Southwest

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 some shares in Capital Southwest Corporation. As individuals, the insiders collectively own US$39m worth of the US$493m company. This shows at least some alignment. You can click here to see if those insiders have been buying or selling.

General Public Ownership

The general public holds a substantial 61% stake in Capital Southwest, suggesting it is a fairly popular stock. This size of ownership gives investors from the general public some collective power. They can and probably do influence decisions on executive compensation, dividend policies and proposed business acquisitions.

Next Steps:

I find it very interesting to look at who exactly owns a company. But to truly gain insight, we need to consider other information, too. Like risks, for instance. Every company has them, and we've spotted 5 warning signs for Capital Southwest (of which 3 are a bit concerning!) you should know about.

If you are like me, you may want to think about whether this company will grow or shrink. Luckily, you can check this free report showing analyst forecasts for its future.

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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This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
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