Stock Analysis

What Type Of Shareholders Make Up ADvTECH Limited's (JSE:ADH) Share Registry?

JSE:ADH
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A look at the shareholders of ADvTECH Limited (JSE:ADH) can tell us which group is most powerful. 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.

ADvTECH is a smaller company with a market capitalization of R5.0b, so it may still be flying under the radar of many institutional investors. In the chart below, we can see that institutions own shares in the company. Let's take a closer look to see what the different types of shareholders can tell us about ADvTECH.

See our latest analysis for ADvTECH

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JSE:ADH Ownership Breakdown November 20th 2020

What Does The Institutional Ownership Tell Us About ADvTECH?

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.

ADvTECH 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 ADvTECH, (below). Of course, keep in mind that there are other factors to consider, too.

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JSE:ADH Earnings and Revenue Growth November 20th 2020

Since institutional investors own more than half the issued stock, the board will likely have to pay attention to their preferences. ADvTECH is not owned by hedge funds. Looking at our data, we can see that the largest shareholder is Public Investment Corporation Limited with 12% of shares outstanding. In comparison, the second and third largest shareholders hold about 12% and 6.1% of the stock.

On further inspection, we found that more than half the company's shares are owned by the top 8 shareholders, suggesting that the interests of the larger shareholders are balanced out to an extent by the smaller ones.

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. Our information suggests that there isn't any analyst coverage of the stock, so it is probably little known.

Insider Ownership Of ADvTECH

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. 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.

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.

I can report that insiders do own shares in ADvTECH Limited. As individuals, the insiders collectively own R438m worth of the R5.0b company. It is good to see some investment by insiders, but it might be worth checking if those insiders have been buying.

General Public Ownership

The general public, with a 16% stake in the company, will not easily be ignored. 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.

Private Company Ownership

It seems that Private Companies own 3.5%, of the ADvTECH stock. Private companies may be related parties. Sometimes insiders have an interest in a public company through a holding in a private company, rather than in their own capacity as an individual. While it's hard to draw any broad stroke conclusions, it is worth noting as an area for further research.

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. For example, we've discovered 2 warning signs for ADvTECH that you should be aware of before investing here.

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.

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