Could Scott Technology Limited's (NZSE:SCT) Investor Composition Influence The Stock Price?

Simply Wall St

Sun, Jun 23, 2019, 7:23 PM

Every investor in Scott Technology Limited (NZSE:SCT) 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. Warren Buffett said that he likes 'a business with enduring competitive advantages that is run by able and owner-oriented people'. So it's nice to see some insider ownership, because it may suggest that management is owner-oriented.

With a market capitalization of NZ$177m, Scott Technology is a small cap stock, so it might not be well known by many institutional investors. Our analysis of the ownership of the company, below, shows that institutions are noticeable on the share registry. Let's delve deeper into each type of owner, to discover more about SCT.

See our latest analysis for Scott Technology

NZSE:SCT Ownership Summary, June 24th 2019

What Does The Institutional Ownership Tell Us About Scott Technology?

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.

We can see that Scott Technology does have institutional investors; and they hold 8.6% of the stock. 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. 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 Scott Technology's earnings history, below. Of course, the future is what really matters.

NZSE:SCT Income Statement, June 24th 2019

We note that hedge funds don't have a meaningful investment in Scott Technology. As far I can tell there isn't analyst coverage of the company, so it is probably flying under the radar.

Insider Ownership Of Scott Technology

While the precise definition of an insider can be subjective, almost everyone considers board members to be insiders. The company management answer to the board; and the latter should represent the interests of shareholders. Notably, sometimes top-level managers are on the board, themselves.

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 Scott Technology Limited. As individuals, the insiders collectively own NZ$9.7m worth of the NZ$177m company. It is good to see some investment by insiders, but I usually like to see higher insider holdings. It might be worth checking if those insiders have been buying.

General Public Ownership

The general public holds a 34% stake in SCT. 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

We can see that Private Companies own 52%, of the shares on issue. It's hard to draw any conclusions from this fact alone, so its worth looking into who owns those private companies. Sometimes insiders or other related parties have an interest in shares in a public company through a separate private company.

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 find historic revenue and earnings in this detailed graph.

If you would prefer check out another company -- one with potentially superior financials -- then do not miss this free list of interesting companies, backed by strong financial data.

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.

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