The big shareholder groups in FONAR Corporation (NASDAQ:FONR) have power over the company. Large companies usually have institutions as shareholders, and we usually see insiders owning shares in 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.
FONAR is not a large company by global standards. It has a market capitalization of US$101m, 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. We can zoom in on the different ownership groups, to learn more about FONAR.
What Does The Institutional Ownership Tell Us About FONAR?
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.
FONAR already has institutions on the share registry. Indeed, they own a respectable stake in 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 FONAR's historic earnings and revenue below, but keep in mind there's always more to the story.
NasdaqCM:FONR Earnings and Revenue Growth July 22nd 2022
Our data indicates that hedge funds own 5.8% of FONAR. That catches my attention because hedge funds sometimes try to influence management, or bring about changes that will create near term value for shareholders. Kayne Anderson Rudnick Investment Management, LLC is currently the company's largest shareholder with 12% of shares outstanding. With 5.8% and 5.6% of the shares outstanding respectively, Renaissance Technologies LLC and Dimensional Fund Advisors LP are the second and third largest shareholders. Additionally, the company's CEO Timothy Damadian directly holds 0.6% of the total shares outstanding.
After doing some more digging, we found that the top 23 have the combined ownership of 50% in the company, suggesting that no single shareholder has significant control over the company.
While it makes sense to study institutional ownership data for a company, it also makes sense to study analyst sentiments to know which way the wind is blowing. As far as we can tell there isn't analyst coverage of the company, so it is probably flying under the radar.
Insider Ownership Of FONAR
The definition of an insider can differ slightly between different countries, but members of the board of directors always count. 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.
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.
We can report that insiders do own shares in FONAR Corporation. In their own names, insiders own US$5.2m worth of stock in the US$101m company. Some would say this shows alignment of interests between shareholders and the board, though we generally prefer to see bigger insider holdings. But it might be worth checking if those insiders have been selling.
General Public Ownership
With a 47% ownership, the general public, mostly comprising of individual investors, have some degree of sway over FONAR. 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:
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. Consider for instance, the ever-present spectre of investment risk. We've identified 1 warning sign with FONAR , and understanding them should be part of your investment process.
Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this freelist 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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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
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