Is Limoneira Company's (NASDAQ:LMNR) Shareholder Ownership Skewed Towards Insiders?
Simply Wall St
4 min read
The big shareholder groups in Limoneira Company (NASDAQ:LMNR) have power over the company. Large companies usually have institutions as shareholders, and we usually see insiders owning shares in smaller companies. 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.
Limoneira is not a large company by global standards. It has a market capitalization of US$198m, which means it wouldn't have the attention of many institutional investors. Taking a look at our data on the ownership groups (below), it seems that institutions are noticeable on the share registry. Let's delve deeper into each type of owner, to discover more about Limoneira.
What Does The Institutional Ownership Tell Us About Limoneira?
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.
Limoneira already has institutions on the share registry. Indeed, they own a respectable stake in 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 Limoneira's historic earnings and revenue below, but keep in mind there's always more to the story.
NasdaqGS:LMNR Earnings and Revenue Growth May 24th 2022
We note that hedge funds don't have a meaningful investment in Limoneira. The company's largest shareholder is Global Alpha Capital Management Ltd., with ownership of 12%. Calavo Growers, Inc. is the second largest shareholder owning 9.7% of common stock, and BlackRock, Inc. holds about 5.8% of the company stock. Additionally, the company's CEO Harold Edwards directly holds 0.9% of the total shares outstanding.
Looking at the shareholder registry, we can see that 50% of the ownership is controlled by the top 11 shareholders, meaning that no single shareholder has a majority interest in the ownership.
Researching institutional ownership is a good way to gauge and filter a stock's expected performance. The same can be achieved by studying analyst sentiments. There are a reasonable number of analysts covering the stock, so it might be useful to find out their aggregate view on the future.
Insider Ownership Of Limoneira
While the precise definition of an insider can be subjective, almost everyone considers board members to be insiders. 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.
Insider ownership is positive when it signals leadership are thinking like the true owners of the company. However, high insider ownership can also give immense power to a small group within the company. This can be negative in some circumstances.
We can report that insiders do own shares in Limoneira Company. As individuals, the insiders collectively own US$13m worth of the US$198m 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
The general public, who are usually individual investors, hold a 34% stake in Limoneira. While this group can't necessarily call the shots, it can certainly have a real influence on how the company is run.
Public Company Ownership
We can see that public companies hold 9.7% of the Limoneira shares on issue. It's hard to say for sure but this suggests they have entwined business interests. This might be a strategic stake, so it's worth watching this space for changes in ownership.
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. Take risks for example - Limoneira has 3 warning signs (and 2 which make us uncomfortable) we think you should know about.
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.
