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A look at the shareholders of Cogstate Limited (ASX:CGS) can tell us which group is most powerful. Institutions will often hold stock in bigger companies, and we expect to see insiders owning a noticeable percentage of the smaller ones. 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.
Cogstate is a smaller company with a market capitalization of AU$68m, so it may still be flying under the radar of many institutional investors. Taking a look at the our data on the ownership groups (below), it’s seems that institutional investors have bought into the company. Let’s delve deeper into each type of owner, to discover more about CGS.
Check out our latest analysis for Cogstate
What Does The Institutional Ownership Tell Us About Cogstate?
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.
Cogstate already has institutions on the share registry. Indeed, they own 11% of the company. This can indicate that the company has a certain degree of credibility in the investment community. However, it is best to be wary of relying on the supposed validation that comes with institutional investors. They too, get it wrong sometimes. 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 Cogstate’s historic earnings and revenue, below, but keep in mind there’s always more to the story.
Cogstate is not owned by hedge funds. 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 Cogstate
While the precise definition of an insider can be subjective, almost everyone considers board members to be insiders. 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.
It seems that insiders own more than half the Cogstate Limited stock. This gives them a lot of power. Given it has a market cap of AU$68m, that means they have AU$40m worth of shares. Most would argue this is a positive, showing strong alignment with shareholders. You can click here to see if those insiders have been buying or selling.