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Today, I will be analyzing Oxbridge Re Holdings Limited’s (NASDAQ:OXBR) recent ownership structure, an important but not-so-popular subject among individual investors. Ownership structure of a company has been found to affect share performance over time. 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 OXBR’s shareholder registry.
Due to the big order sizes of institutional investors, a company’s shares can experience large, one-sided momentum, driven by high volume of shares removed from, or injected into, the market. Generally, an institutional ownership of 7.86%, in the case of OXBR, should not concern investors in terms of high stock volatility. Another important owner type is hedge funds, who tend to be investors with short-term horizons. With 9.14% ownership in OXBR, they seem to have a significant enough holding to cause a spike in volatility in the short run. However, I would explore its ownership registry in more detail to check how other ownership types affect its investment case for the long-term investor.
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. 16.46% ownership of OXBR 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
The general public holds a substantial 54.78% stake in OXBR, 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 OXBR are private companies that hold a stake of 5.86% in OXBR. These are companies that are mainly invested due to their strategic interests or are incentivized by reaping capital gains on investments their shareholdings. This kind of ownership, if predominantly strategic, can give these companies a significant power to affect OXBR’s business strategy. Thus, potential investors should look into these business relations and check how it can impact long-term shareholder returns.
While OXBR has a low level of institutional ownership, active hedge funds still hold a significant stake in the company. The participation of these active investors has been linked to the volatile nature of share prices. An investment in OXBR should come with enough margin of safety in order to avoid significant dips in shareholding value. However, ownership structure should not be the only focus of your research when constructing an investment thesis around OXBR. Instead, you should be evaluating company-specific factors such as Oxbridge Re Holdings’s past track record and financial health. I urge you to complete your research by taking a look at the following:
1. Financial Health: Is OXBR’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. 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.