In this article, I will take a quick look at Gulf & Pacific Equities Corp’s (TSXV:GUF) recent ownership structure – an unconventional investing subject, but an important one. 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 GUF’s shareholder registry.
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. GUF insiders hold a significant stake of 69.64% 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. Insider buying may be a sign of upbeat future expectations, however, selling doesn’t necessarily mean the opposite as insiders may be motivated by their personal financial needs.
General Public Ownership
The general public holds a substantial 29.89% stake in GUF, making it a highly popular stock among retail investors. With this size of ownership, retail investors can collectively play a role in major company policies that affect shareholders returns, including executive remuneration and the appointment of directors. They can also exercise the power to decline an acquisition or merger that may not improve profitability.
Private Company Ownership
Potential investors in GUF should also look at another important group of investors: private companies, with a stake of 0.47%, who are primarily invested because of strategic and capital gain interests. However, an ownership of this size may be relatively insignificant, meaning that these shareholders may not have the potential to influence GUF’s business strategy. Thus, investors not need worry too much about the consequences of these holdings.
A relatively significant holding of company insiders could mean high alignment with shareholders. But at the same time, investors should be aware of the level of influence executives could have on governance decisions. However, ownership structure should not be the only determining factor when you’re building an investment thesis for GUF. Instead, you should be evaluating company-specific factors such as the intrinsic valuation, which is a key driver of Gulf & Pacific Equities’s share price. I urge you to complete your research by taking a look at the following:
- Financial Health: Is GUF’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.
- Past Track Record: Has GUF 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 GUF’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 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.