In this article, I’m going to take a look at Alio Gold Inc’s (TSE:ALO) latest ownership structure, a non-fundamental factor which is important, but remains a less discussed subject among investors. A company’s ownership structure is often linked to its share performance in both the long- and short-term. Since the same amount of capital coming from an activist institution and a passive mutual fund has different implications on corporate governance, it is a useful exercise to deconstruct ALO’s shareholder registry.
Institutions account for 13.08% of ALO’s outstanding shares, a significant enough holding to move stock prices if they start buying and selling in large quantities, especially when there are relatively small amounts of shares available on the market to trade. Although ALO 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. In the case of ALO, investors need not worry about such volatility considering active hedge funds don’t have a significant stake. However, we should dig deeper into ALO’s ownership structure and find out how other key ownership classes can affect its investment profile.
Insiders form a group of important ownership types as they manage the company’s operations and decide the best use of capital. Insider ownership has been linked to better alignment between management and shareholders. ALO insiders hold a not-so-significant 1.08% stake in the company, which somewhat aligns their interests with that of shareholders. However, a higher level of insider ownership has been linked to management executing on high-returning projects instead of expansion projects for the sake of apparent growth. It would also be interesting to check what insiders have been doing with their shareholding recently. Insider buying can be a positive indicator of future performance, but a selling decision can be simply driven by personal financial requirements.
General Public Ownership
A substantial ownership of 82.91% in ALO 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.
Public Company Ownership
Another group of owners that a potential investor in ALO should consider are other public companies, with a stake of 2.93%. While they invest more often due to strategic interests, an investment can also be driven by capital gains through share price appreciation. However, an ownership of this size may be relatively insignificant, meaning that these shareholders may not have the potential to influence ALO’s business strategy. Thus, investors not need worry too much about the consequences of these holdings.
The company’s high institutional ownership makes margin of safety a very important consideration to existing investors since long bull and bear trends often emerge when these big-ticket investors see a change in long-term potential of the company. This will allow investors to reduce the impact of non-fundamental factors, such as volatile block trading impact on their portfolio value. However, if you are building an investment case for ALO, ownership structure alone should not dictate your decision to buy or sell the stock. Rather, you should be examining fundamental factors such as the intrinsic valuation, which is a key driver of Alio Gold’s share price. I urge you to complete your research by taking a look at the following:
- Future Outlook: What are well-informed industry analysts predicting for ALO’s future growth? Take a look at our free research report of analyst consensus for ALO’s outlook.
- Past Track Record: Has ALO 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 ALO’s historicals for more clarity.
- 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 past 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. For errors that warrant correction please contact the editor at firstname.lastname@example.org.