Hedge funds investors may adopt severe steps after FitLife Brands, Inc.'s (NASDAQ:FTLF) latest 13% drop adds to a year losses

Key Insights

• Given the large stake in the stock by institutions, FitLife Brands' stock price might be vulnerable to their trading decisions
• The top 2 shareholders own 57% of the company
• Recent purchases by insiders

We check all companies for important risks. See what we found for FitLife Brands in our free report.

To get a sense of who is truly in control of FitLife Brands, Inc. (NASDAQ:FTLF), it is important to understand the ownership structure of the business. And the group that holds the biggest piece of the pie are hedge funds with 56% ownership. In other words, the group stands to gain the most (or lose the most) from their investment into the company.

And so it follows that hedge funds investors was the group most impacted after the company's market cap fell to US$133m last week after a 13% drop in the share price. The recent loss, which adds to a one-year loss of 1.7% for stockholders, may not sit well with this group of investors. Hedge funds typically use aggressive strategies that focus on short-term gains. And given they have significant interest in FitLife Brands, they have a lot of power, and if the company's performance doesn't improve, it could lead to them influencing management decisions that aren't in line with long-term objectives.

In the chart below, we zoom in on the different ownership groups of FitLife Brands.

View our latest analysis for FitLife Brands

What Does The Institutional Ownership Tell Us About FitLife Brands?

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.

FitLife Brands already has institutions on the share registry. Indeed, they own a respectable stake in the company. This suggests some credibility amongst professional investors. But we can't rely on that fact alone since institutions make bad investments sometimes, just like everyone does. It is not uncommon to see a big share price drop if two large institutional investors try to sell out of a stock at the same time. So it is worth checking the past earnings trajectory of FitLife Brands, (below). Of course, keep in mind that there are other factors to consider, too.

Our data indicates that hedge funds own 56% of FitLife Brands. That's interesting, because hedge funds can be quite active and activist. Many look for medium term catalysts that will drive the share price higher. Our data shows that Sudbury Capital Management, LLC is the largest shareholder with 45% of shares outstanding. With 13% and 11% of the shares outstanding respectively, Dayton Judd and Askeladden Capital Management LLC are the second and third largest shareholders. Dayton Judd, who is the second-largest shareholder, also happens to hold the title of Chief Executive Officer.

To make our study more interesting, we found that the top 2 shareholders have a majority ownership in the company, meaning that they are powerful enough to influence the decisions of the company.

While studying institutional ownership for a company can add value to your research, it is also a good practice to research analyst recommendations to get a deeper understand of a stock's expected performance. There is a little analyst coverage of the stock, but not much. So there is room for it to gain more coverage.

Insider Ownership Of FitLife Brands

The definition of an insider can differ slightly between different countries, but members of the board of directors always count. Company management run the business, but the CEO will answer to the board, even if he or she is a member of it.

Most consider insider ownership a positive because it can indicate the board is well aligned with other shareholders. However, on some occasions too much power is concentrated within this group.

Our most recent data indicates that insiders own a reasonable proportion of FitLife Brands, Inc.. It has a market capitalization of just US$133m, and insiders have US$20m worth of shares in their own names. This may suggest that the founders still own a lot of shares. You can click here to see if they have been buying or selling.

General Public Ownership

The general public, who are usually individual investors, hold a 24% stake in FitLife Brands. While this group can't necessarily call the shots, it can certainly have a real influence on how the company is run.

Next Steps:

While it is well worth considering the different groups that own a company, there are other factors that are even more important.

Many find it useful to take an in depth look at how a company has performed in the past. You can access this detailed graph of past earnings, revenue and cash flow.

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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

This article by Simply Wall St 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. Simply Wall St has no position in any stocks mentioned.