Every investor in Ero Copper Corp (TSE:ERO) should be aware of the most powerful shareholder groups. Generally speaking, as a company grows, institutions will increase their ownership. Conversely, insiders often decrease their ownership over time. I quite like to see at least a little bit of insider ownership. As Charlie Munger said ‘Show me the incentive and I will show you the outcome.’
With a market capitalization of CA$857m, Ero Copper is a small cap stock, so it might not be well known by 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. Let’s take a closer look to see what the different types of shareholder can tell us about ERO.
What Does The Institutional Ownership Tell Us About Ero Copper?
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 26% of Ero Copper. 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 Ero Copper’s historic earnings and revenue, below, but keep in mind there’s always more to the story.
Hedge funds don’t have many shares in Ero Copper. Quite a few analysts cover the stock, so you could look into forecast growth quite easily.
Insider Ownership Of Ero Copper
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 Ero Copper Corp. It has a market capitalization of just CA$857m, and insiders have CA$152m worth of shares in their own names. I would say this shows alignment with shareholders, but it is worth noting that the company is still quite small; some insiders may have founded the business. You can click here to see if those insiders have been buying or selling.
General Public Ownership
The general public holds a 34% stake in ERO. 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 Equity Ownership
With an ownership of 22%, private equity firms are in a position to play a role in shaping corporate strategy with a focus on value creation. Some might like this, because private equity are sometimes activists who hold management accountable. But other times, private equity is selling out, having taking the company public.
It’s always worth thinking about the different groups who own shares in a company. But to understand Ero Copper better, we need to consider many other factors.
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.
But ultimately it is the future, not the past, that will determine how well the owners of this business will do. Therefore we think it advisable to take a look at this free report showing whether analysts are predicting a brighter 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 firstname.lastname@example.org.