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Do Insiders Own Lots Of Shares In Karooooo Ltd. (NASDAQ:KARO)?

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·4 min read
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A look at the shareholders of Karooooo Ltd. (NASDAQ:KARO) can tell us which group is most powerful. Insiders often own a large chunk of younger, smaller, companies while huge companies tend to have institutions as shareholders. 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.

With a market capitalization of US$1.1b, Karooooo is a decent size, so it is probably on the radar of institutional investors. In the chart below, we can see that institutions own shares in the company. Let's delve deeper into each type of owner, to discover more about Karooooo.

See our latest analysis for Karooooo

ownership-breakdown
ownership-breakdown

What Does The Institutional Ownership Tell Us About Karooooo?

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 Karooooo does have institutional investors; and they hold a good portion of the company's stock. This suggests some credibility amongst professional investors. But we can't rely on that fact alone since institutions make bad investments sometimes, just like everyone does. 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 Karooooo's earnings history below. Of course, the future is what really matters.

earnings-and-revenue-growth
earnings-and-revenue-growth

We note that hedge funds don't have a meaningful investment in Karooooo. Looking at our data, we can see that the largest shareholder is the CEO Isaias Jose Calisto with 66% of shares outstanding. This essentially means that they have significant control over the outcome or future of the company, which is why insider ownership is usually looked upon favourably by prospective buyers. Georgem Holdings (Pty) Ltd. is the second largest shareholder owning 11% of common stock, and Goldman Sachs Group, Investment Banking and Securities Investments holds about 6.3% of the company stock.

While it makes sense to study institutional ownership data for a company, it also makes sense to study analyst sentiments to know which way the wind is blowing. There are plenty of analysts covering the stock, so it might be worth seeing what they are forecasting, too.

Insider Ownership Of Karooooo

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.

I generally consider insider ownership to be a good thing. However, on some occasions it makes it more difficult for other shareholders to hold the board accountable for decisions.

It seems that insiders own more than half the Karooooo Ltd. stock. This gives them a lot of power. Insiders own US$736m worth of shares in the US$1.1b company. That's extraordinary! Most would argue this is a positive, showing strong alignment with shareholders. You can click here to see if they have been selling down their stake.

General Public Ownership

With a 11% ownership, the general public have some degree of sway over Karooooo. 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

It seems that Private Companies own 11%, of the Karooooo stock. Private companies may be related parties. Sometimes insiders have an interest in a public company through a holding in a private company, rather than in their own capacity as an individual. While it's hard to draw any broad stroke conclusions, it is worth noting as an area for further research.

Next Steps:

While it is well worth considering the different groups that own a company, there are other factors that are even more important. For example, we've discovered 2 warning signs for Karooooo that you should be aware of before investing here.

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.

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. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.