Could The AMCON Distributing Company (NYSEMKT:DIT) Ownership Structure Tell Us Something Useful?

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The big shareholder groups in AMCON Distributing Company (NYSEMKT:DIT) have power over the company. Institutions will often hold stock in bigger companies, and we expect to see insiders owning a noticeable percentage of the smaller ones. 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.’

AMCON Distributing is a smaller company with a market capitalization of US$57m, so it may still be flying under the radar of many institutional investors. In the chart below below, we can see that institutions own shares in the company. Let’s take a closer look to see what the different types of shareholder can tell us about DIT.

See our latest analysis for AMCON Distributing

AMEX:DIT Ownership Summary, July 17th 2019
AMEX:DIT Ownership Summary, July 17th 2019

What Does The Institutional Ownership Tell Us About AMCON Distributing?

Institutions typically measure themselves against a benchmark when reporting to their own investors, so they often become more enthusiastic about a stock once it’s included in a major index. We would expect most companies to have some institutions on the register, especially if they are growing.

As you can see, institutional investors own 14% of AMCON Distributing. 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. When multiple institutions own a stock, there’s always a risk that they are in a ‘crowded trade’. When such a trade goes wrong, multiple parties may compete to sell stock fast. This risk is higher in a company without a history of growth. You can see AMCON Distributing’s historic earnings and revenue, below, but keep in mind there’s always more to the story.

AMEX:DIT Income Statement, July 17th 2019
AMEX:DIT Income Statement, July 17th 2019

It would appear that 6.0% of AMCON Distributing shares are controlled by hedge funds. That worth noting, since hedge funds are often quite active investors, who may try to influence management. Many want to see value creation (and a higher share price) in the short term or medium term. We’re not picking up on any analyst coverage of the stock at the moment, so the company is unlikely to be widely held.

Insider Ownership Of AMCON Distributing

The definition of company insiders can be subjective, and does vary between jurisdictions. Our data reflects individual insiders, capturing board members at the very least. Company management run the business, but the CEO will answer to the board, even if he or she is a member of it.

Insider ownership is positive when it signals leadership are thinking like the true owners of the company. However, high insider ownership can also give immense power to a small group within the company. This can be negative in some circumstances.

It seems that insiders own more than half the AMCON Distributing Company stock. This gives them a lot of power. So they have a US$35m stake in this US$57m business. It is good to see this level of investment. You can check here to see if those insiders have been buying recently.

General Public Ownership

With a 18% ownership, the general public have some degree of sway over DIT. This size of ownership, while considerable, may not be enough to change company policy if the decision is not in sync with other large shareholders.

Next Steps:

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

I like to dive deeper into how a company has performed in the past. You can access this interactive graph of past earnings, revenue and cash flow for free .

Of course this may not be the best stock to buy. So take a peek at this free free list of interesting companies.

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.

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. 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. Simply Wall St has no position in the stocks mentioned. Thank you for reading.