In this article, I’m going to take a look at Central Securities Corp’s (AMEX:CET) latest ownership structure, a non-fundamental factor which is important, but remains a less discussed subject among investors. The impact of a company’s ownership structure affects both its short- and long-term performance. Differences in ownership structure of companies can have a profound effect on how management’s incentives are aligned with shareholder returns, which is why we’ll take a moment to analyse CET’s shareholder registry.

See our latest analysis for Central Securities

Institutional Ownership

In CET’s case, institutional ownership stands at 47.56%, significant enough to cause considerable price moves in the case of large institutional transactions, especially when there is a low level of public shares available on the market to trade. Although CET has a high institutional ownership, such stock moves, in the short-term, are more commonly linked to a particular type of active institutional investors – hedge funds. For CET shareholders, the potential of this type of share price volatility shouldn’t be as concerning as hedge fund ownership is is not significant,indicating few chances of such sudden price moves. While that hardly seems concerning, I will explore further into CET’s ownership type to find out how it can affect the company’s investment profile.

Insider Ownership

I find insiders are another important group of stakeholders, who are directly involved in making key decisions related to the use of capital. In essence, insider ownership is more about the alignment of shareholders’ interests with the management. CET insiders hold a significant stake of 11.58% in the company. This level of insider ownership has been found to have a negative impact on companies with consistently low PE ratios (underperformers), while it has been positive in the case of high PE ratio firms (outperformers). It may be interesting to take a look at what company insiders have been doing with their holdings lately. Insiders buying company shares can be a positive indicator of future performance, but a selling decision can simply be driven by personal financial needs.

General Public Ownership

The general public holds a substantial 40.85% stake in CET, making it a highly popular stock among retail investors. This size of ownership gives retail investors collective power in deciding on major policy decisions such as executive compensation, appointment of directors and acquisitions of businesses. This level of ownership gives retail investors the power to sway key policy decisions such as board composition, executive compensation, and potential acquisitions. This is a positive sign for an investor who wants to be involved in key decision-making of the company.