In this analysis, my focus will be on developing a perspective on Camber Energy Inc’s (AMEX:CEI) latest ownership structure, a less discussed, but important factor. The impact of a company’s ownership structure affects both its short- and long-term performance. Differences in ownership structure of companies can have a profound effect on how management’s incentives are aligned with shareholder returns, which is why we’ll take a moment to analyse XYZ’s shareholder registry. All data provided is as of the most recent financial year end.
Institutional investors typically buy and sell shares in large magnitudes which can significantly sway the share price, especially when there are relatively small amounts of shares available on the market to trade. With an institutional ownership of 5.03%, CEI doesn’t seem too exposed to higher volatility resulting from institutional trading. Low coverage stocks like CEI tend to be favourite picks of legendary investor Peter Lynch, who used to cash in on the rally supported by institutional buying as the stock gained popularity.
Insiders form another group of important ownership types as they manage the company’s operations and decide the best use of capital. Insider ownership has been linked to better alignment between management and shareholders. 8.89% ownership makes insiders an important shareholder group. This level of stake with insiders indicate highly aligned interests of shareholders and company executives. However, it would be interesting to take a look at their buying and selling activities lately. Buying may be sign of upbeat future expectations, but selling doesn’t necessarily mean the opposite as the insiders may be motivated by financial needs or they are simply diversifying their risk.
General Public Ownership
A substantial ownership of 74.71% in CEI is held by the general public. 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 CEI are private companies that hold a stake of 11.37% in CEI. 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 CEI’s business strategy. Thus, potential investors should look into these business relations and check how it can impact long-term shareholder returns.
What this means for you:
Are you a shareholder? Institutional ownership in CEI is not at a level that would concern investors. We are less likely to see sustained downtrends or significant volatility resulting from large institutional trading. If you’re interested in bolstering your portfolio with new stocks and are looking for ideas, take a look at our free app to see my list of stocks with a strong growth potential.
Are you a potential investor? Ownership structure should not be the only focus of your research when constructing an investment thesis around CEI. Instead, you should be evaluating fundamental factors like the relative valuation of CEI, which is an important driver that determines CEI’s share price. Take a look at our most recent infographic report on CEI for a more in-depth analysis of these factors to help you make a more well-informed investment decision.
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.