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Do Directors Own ARC Resources Ltd. (TSE:ARX) Shares?

Brad Riley

The big shareholder groups in ARC Resources Ltd. (TSE:ARX) have power over the company. Large companies usually have institutions as shareholders, and we usually see insiders owning shares in smaller companies. We also tend to see lower insider ownership in companies that were previously publicly owned.

ARC Resources has a market capitalization of CA$3.1b, so we would expect some institutional investors to have noticed the stock. In the chart below below, we can see that institutions own shares in the company. We can zoom in on the different ownership groups, to learn more about ARX.

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TSX:ARX Ownership Summary January 17th 19

What Does The Institutional Ownership Tell Us About ARC Resources?

Institutional investors commonly compare their own returns to the returns of a commonly followed index. So they generally do consider buying larger companies that are included in the relevant benchmark index.

We can see that ARC Resources does have institutional investors; and they hold 45% 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. It is not uncommon to see a big share price drop if two large institutional investors try to sell out of a stock at the same time. So it is worth checking the past earnings trajectory of ARC Resources, (below). Of course, keep in mind that there are other factors to consider, too.

TSX:ARX Income Statement Export January 17th 19

Hedge funds don’t have many shares in ARC Resources. Quite a few analysts cover the stock, so you could look into forecast growth quite easily.

Insider Ownership Of ARC Resources

While the precise definition of an insider can be subjective, almost everyone considers board members to be insiders. 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.

Our most recent data indicates that insiders own less than 1% of ARC Resources Ltd.. It’s a big company, so even a small proportional interest can create alignment between the board and shareholders. In this case insiders own CA$21m worth of shares. It is always good to see at least some insider ownership, but it might be worth checking if those insiders have been selling.

General Public Ownership

The general public — mostly retail investors — own 54% of ARC Resources . With this size of ownership, retail investors can collectively play a role in decisions that affect shareholder returns, such as dividend policies and the appointment of directors. They can also exercise the power to decline an acquisition or merger that may not improve profitability.

Next Steps:

While it is well worth considering the different groups that own a company, there are other factors that are even more important.

I like to dive deeper into how a company has performed in the past. You can find historic revenue and earnings in this detailed graph.

If you are like me, you may want to think about whether this company will grow or shrink. Luckily, you can check this free report showing analyst forecasts for its future.

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.