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Every investor in Lithium Australia NL (ASX:LIT) should be aware of the most powerful shareholder groups. Institutions will often hold stock in bigger companies, and we expect to see insiders owning a noticeable percentage of the smaller ones. 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.’
With a market capitalization of AU$41m, Lithium Australia 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 institutional investors have not yet purchased much of the company. We can zoom in on the different ownership groups, to learn more about LIT.
Check out our latest analysis for Lithium Australia
What Does The Institutional Ownership Tell Us About Lithium Australia?
Institutional investors commonly compare their own returns to the returns of a commonly followed index. So they generally do consider buying larger companies that are included in the relevant benchmark index.
Less than 5% of Lithium Australia is held by institutional investors. This suggests that some funds have the company in their sights, but many have not yet bought shares in it. So if the company itself can improve over time, we may well see more institutional buyers in the future. When multiple institutional investors want to buy shares, we often see a rising share price. The past revenue trajectory (shown below) can be an indication of future growth, but there are no guarantees.
We note that hedge funds don’t have a meaningful investment in Lithium Australia. As far I can tell there isn’t analyst coverage of the company, so it is probably flying under the radar.
Insider Ownership Of Lithium Australia
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.
Shareholders would probably be interested to learn that insiders own shares in Lithium Australia NL. It has a market capitalization of just AU$41m, and insiders have AU$3.2m worth of shares, in their own names. This shows at least some alignment, but I usually like to see larger insider holdings. You can click here to see if those insiders have been buying or selling.