The Coca-Cola HBC AG (LON:CCH) Ownership Structure Could Be Important
In this article, I will take a quick look at Coca-Cola HBC AG’s (LON:CCH) recent ownership structure – an unconventional investing subject, but an important one. Ownership structure of a company has been found to affect share performance over time. Differences in ownership structure of companies can have a profound effect on how management’s incentives are aligned with shareholder returns, and whether they adhere to corporate governance best practices. Although this is an important factor for long-term investors, many investors can also be impacted by institutional presence and their high-volume trading. Now I will analyze CCH’s shareholder registry in more detail.
View our latest analysis for Coca-Cola HBC
Institutional Ownership
With an institutional ownership of 22.8%, CCH can face volatile stock price movements if institutions execute block trades on the open market, more so, when there are relatively small amounts of shares available on the market to trade Although CCH 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 CCH 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 CCH’s ownership type to find out how it can affect the company’s investment profile.
Insider Ownership
I find insiders are an 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. A stake of 1.1% in the large-cap CCH is relatively significant. This means there is some alignment of interest with shareholders. A higher level of insider ownership has been found to reflect the choosing of projects with higher return on investments compared to lower returning projects for the sake of expansion. I will also like to check what insiders have been doing recently with their holdings. 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 29.8% stake in CCH, 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
Another important group of owners for potential investors in CCH are private companies that hold a stake of 23.2% in CCH. 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 CCH, 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.
Next Steps:
CCH’s considerably high level of institutional ownership calls for further analysis into its margin of safety. 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 CCH, 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 Coca-Cola HBC’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 CCH’s future growth? Take a look at our free research report of analyst consensus for CCH’s outlook.
Past Track Record: Has CCH 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 CCH’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 editorial-team@simplywallst.com.
