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Could Altium Limited's (ASX:ALU) Investor Composition Influence The Stock Price?

Simply Wall St

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Every investor in Altium Limited (ASX:ALU) should be aware of the most powerful shareholder groups. Institutions often own shares in more established companies, while it's not unusual to see insiders own a fair bit of 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.

Altium is a pretty big company. It has a market capitalization of AU$4.6b. Normally institutions would own a significant portion of a company this size. In the chart below below, we can see that institutional investors have bought into the company. We can zoom in on the different ownership groups, to learn more about ALU.

See our latest analysis for Altium

ASX:ALU Ownership Summary, July 8th 2019

What Does The Institutional Ownership Tell Us About Altium?

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.

As you can see, institutional investors own 20% of Altium. 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. If multiple institutions change their view on a stock at the same time, you could see the share price drop fast. It's therefore worth looking at Altium's earnings history, below. Of course, the future is what really matters.

ASX:ALU Income Statement, July 8th 2019

Altium is not owned by hedge funds. There are a reasonable number of analysts covering the stock, so it might be useful to find out their aggregate view on the future.

Insider Ownership Of Altium

While the precise definition of an insider can be subjective, almost everyone considers board members to be insiders. Management ultimately answers to the board. However, it is not uncommon for managers to be executive board members, especially if they are a founder or the CEO.

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.

Our most recent data indicates that insiders own a reasonable proportion of Altium Limited. Insiders own AU$494m worth of shares in the AU$4.6b company. That's quite meaningful. It is good to see this level of investment. You can check here to see if those insiders have been buying recently.

General Public Ownership

The general public, who are mostly retail investors, collectively hold 68% of Altium shares. This level of ownership gives retail investors the power to sway key policy decisions such as board composition, executive compensation, and the dividend payout ratio.

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.

I like to dive deeper into how a company has performed in the past. You can access this interactive graph of past earnings, revenue and cash flow, for free .

Ultimately the future is most important. You can access this free report on analyst forecasts for the company.

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.

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned. Thank you for reading.