In this article, I will take a quick look at Millennium Limited’s (ASX:MHD) recent ownership structure – an unconventional investing subject, but an important one. A company’s ownership structure is often linked to its share performance in both the long- and short-term. Since the effect of an active institutional investor with a similar ownership as a passive pension-fund can be vastly different on a company’s corporate governance and accountability of shareholders, investors should take a closer look at MHD’s shareholder registry. All data provided is as of the most recent financial year end.

Check out our latest analysis for Millennium

Institutional Ownership

Institutional investors typically buy and sell shares in large magnitudes which can significantly sway the share price, especially when there are relatively small amounts of shares available on the market to trade. A low institutional ownership of 5.07% puts MHD on a list of companies that are not likely exposed to spikes in volatility resulting from institutional trading. Less covered stocks like MHD used to feature in legendary investor Peter Lynch’s portfolio, which would later be bought up by fast-following institutions as the stock gained more popularity.

Insider Ownership

Another important group of shareholders are company insiders. Insider ownership has to do more with how the company is managed and less to do with the direct impact of the magnitude of shares trading on the market. 66.33% ownership of MHD insiders is large enough to make an impact on shareholder returns. In general, this level of insider ownership has negatively affected underperforming (consistently low PE ratio) companies and positively affected the companies that outperform (consistently high PE ratio). Another aspect of insider ownership is to learn about their recent transactions. 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

A substantial ownership of 12.53% in MHD is held by the general public. 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.

Private Company Ownership

Another important group of owners for potential investors in MHD are private companies that hold a stake of 16.07% in MHD. These are companies that are mainly invested due to their strategic interests or are incentivized by reaping capital gains on investments their shareholdings. With this size of ownership in MHD, this ownership class can affect the company’s business strategy. As a result, potential investors should further explore the company’s business relations with these companies and find out if they can affect shareholder returns in the long-term.

What this means for you:

Institutional ownership level and composition in MHD is not high nor active enough to significantly impact its investment thesis. However, if you are building an investment case for MHD, ownership structure alone should not dictate your decision to buy or sell the stock. Rather, you should be looking at fundamental drivers such as the intrinsic valuation, which is a key driver of Millennium’s share price. I urge you to complete your research by taking a look at the following:

• 1. Financial Health: Is MHD’s operations financially sustainable? Balance sheets can be hard to analyze, which is why we’ve done it for you. Check out our financial health checks here.

• 2. Past Track Record: Has MHD been consistently performing well irrespective of the ups and downs in the market? Go into more detail in the past performance analysis and take a look at the free visual representations of MHD’s historicals for more clarity.

• 3. Other High-Performing Stocks: Are there other stocks that provide better prospects with proven track records? Explore our free list of these great stocks here.

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.
To help readers see pass the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price sensitive company announcements.

The author is an independent contributor and at the time of publication had no position in the stocks mentioned.