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Every investor in Energy Action Limited (ASX:EAX) should be aware of the most powerful shareholder groups. Insiders often own a large chunk of younger, smaller, companies while huge companies tend to have institutions as shareholders. 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.’
Energy Action is not a large company by global standards. It has a market capitalization of AU$20m, which means it wouldn’t have the attention of many institutional investors. Our analysis of the ownership of the company, below, shows that institutional investors have bought into the company. Let’s delve deeper into each type of owner, to discover more about EAX.
See our latest analysis for Energy Action
What Does The Institutional Ownership Tell Us About Energy Action?
Many institutions measure their performance against an index that approximates the local market. So they usually pay more attention to companies that are included in major indices.
Energy Action already has institutions on the share registry. Indeed, they own 25% of 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. 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 Energy Action’s historic earnings and revenue, below, but keep in mind there’s always more to the story.
Hedge funds don’t have many shares in Energy Action. Our information suggests that there isn’t any analyst coverage of the stock, so it is probably little known.
Insider Ownership Of Energy Action
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.
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 Energy Action Limited. Insiders own AU$5m worth of shares in the AU$20m company. 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.