Breaking Down North American Construction Group Ltd's (NYSE:NOA) Ownership Structure

In this article, I will take a quick look at North American Construction Group Ltd’s (NYSE:NOA) recent ownership structure – an unconventional investing subject, but an important one. Ownership structure of a company has been found to affect share performance over time. 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. Now I will analyze NOA's shareholder registry in more detail.

Check out our latest analysis for North American Construction Group

Institutional Ownership

In NOA's case, institutional ownership stands at 33.54%, significant enough to cause considerable price moves in the case of large institutional transactions, especially when there is a low level of public shares available on the market to trade. These moves, at least in the short-term, are generally observed in an institutional ownership mix comprising of active stock pickers, in particular levered hedge funds, which can cause large price swings. Considering hedge funds hold a stake of 12.35% in the company, NOA shares may experience high short-term volatility as this class of institutions are frequently found to sell significantly during market-wide shocks. I am going to further examine NOA's ownership structure to check how other major shareholders can affect its investment case.

Insider Ownership

Insiders form a group of important ownership types as they manage the company's operations and decide the best use of capital. Insider ownership has been linked to better alignment between management and shareholders. A major group of owners of NOA is individual insiders, sitting with a hefty 10.22% 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. While insider buying is possibly a sign of a positive outlook for the company, selling doesn't necessarily indicate a negative outlook as they may be selling to meet personal financial needs.

General Public Ownership

The general public holds a substantial 43.36% stake in NOA, making it a highly popular stock among retail investors. 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 Ownership

Another group of owners that a potential investor in NOA should consider are private companies, with a stake of 0.54%. 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 NOA's business strategy. Thus, investors not need worry too much about the consequences of these holdings.

Next Steps:

I suggest investors seek some degree of margin of safety due to high institutional ownership in NOA, 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, ownership structure should not be the only focus of your research when constructing an investment thesis around NOA. Rather, you should be looking at fundamental drivers such as North American Construction Group's past track record and financial health. I urge you to complete your research by taking a look at the following:

1. Future Outlook: What are well-informed industry analysts predicting for NOA’s future growth? Take a look at our free research report of analyst consensus for NOA’s outlook.
2. Past Track Record: Has NOA 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 NOA'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.

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.

To help readers see past the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price-sensitive company announcements.

The author is an independent contributor and at the time of publication had no position in the stocks mentioned. For errors that warrant correction please contact the editor at editorial-team@simplywallst.com.

Simply Wall St analyst Simply Wall St and Simply Wall St have no position in any of the companies mentioned. This article is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. 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.