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Could The AIC Resources Limited (ASX:A1C) Ownership Structure Tell Us Something Useful?

Ashwin Virk

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The big shareholder groups in AIC Resources Limited (ASX:A1C) have power over the company. Large companies usually have institutions as shareholders, and we usually see insiders owning shares in smaller companies. Warren Buffett said that he likes ‘a business with enduring competitive advantages that is run by able and owner-oriented people’. So it’s nice to see some insider ownership, because it may suggest that management is owner-oriented.

AIC Resources is a smaller company with a market capitalization of AU$9.0m, so it may still be flying under the radar of many institutional investors. Taking a look at the our data on the ownership groups (below), it’s seems that institutions own shares in the company. We can zoom in on the different ownership groups, to learn more about A1C.

See our latest analysis for AIC Resources

ASX:A1C Ownership Summary February 12th 19

What Does The Institutional Ownership Tell Us About AIC Resources?

Many institutions measure their performance against an index that approximates the local market. So they usually pay more attention to companies that are included in major indices.

We can see that AIC Resources does have institutional investors; and they hold 6.0% of the stock. This can indicate that the company has a certain degree of credibility in the investment community. However, it is best to be wary of relying on the supposed validation that comes with institutional investors. They too, get it wrong sometimes. When multiple institutions own a stock, there’s always a risk that they are in a ‘crowded trade’. When such a trade goes wrong, multiple parties may compete to sell stock fast. This risk is higher in a company without a history of growth. You can see AIC Resources’s historic earnings and revenue, below, but keep in mind there’s always more to the story.

ASX:A1C Income Statement Export February 12th 19

Hedge funds don’t have many shares in AIC Resources. Our information suggests that there isn’t any analyst coverage of the stock, so it is probably little known.

Insider Ownership Of AIC Resources

The definition of an insider can differ slightly between different countries, but members of the board of directors always count. The company management answer to the board; and the latter should represent the interests of shareholders. Notably, sometimes top-level managers are on the board, themselves.

Insider ownership is positive when it signals leadership are thinking like the true owners of the company. However, high insider ownership can also give immense power to a small group within the company. This can be negative in some circumstances.

It seems insiders own a significant proportion of AIC Resources Limited. Insiders own AU$1.7m worth of shares in the AU$9.0m company. It is great to see insiders so invested in the business. It might be worth checking if those insiders have been buying recently.

General Public Ownership

The general public holds a 41% stake in A1C. While this size of ownership may not be enough to sway a policy decision in their favour, they can still make a collective impact on company policies.

Private Company Ownership

We can see that Private Companies own 34%, of the shares on issue. It might be worth looking deeper into this. If related parties, such as insiders, have an interest in one of these private companies, that should be disclosed in the annual report. Private companies may also have a strategic interest in the company.

Next Steps:

I find it very interesting to look at who exactly owns a company. But to truly gain insight, we need to consider other information, too.

Many find it useful to take an in depth look at how a company has performed in the past. You can access this detailed graph of past earnings, revenue and cash flow .

Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of interesting companies.

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.