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Do Institutions Own Research Frontiers Incorporated (NASDAQ:REFR) Shares?

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Every investor in Research Frontiers Incorporated (NASDAQ:REFR) should be aware of the most powerful shareholder groups. Large companies usually have institutions as shareholders, and we usually see insiders owning shares in 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.

With a market capitalization of US$63m, Research Frontiers 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 institutional investors have bought into the company. Let’s delve deeper into each type of owner, to discover more about REFR.

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NasdaqCM:REFR Ownership Summary January 21st 19
NasdaqCM:REFR Ownership Summary January 21st 19

What Does The Institutional Ownership Tell Us About Research Frontiers?

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.

Research Frontiers already has institutions on the share registry. Indeed, they own 6.3% of the company. 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 Research Frontiers, (below). Of course, keep in mind that there are other factors to consider, too.

NasdaqCM:REFR Income Statement Export January 21st 19
NasdaqCM:REFR Income Statement Export January 21st 19

We note that hedge funds don’t have a meaningful investment in Research Frontiers. As far I can tell there isn’t analyst coverage of the company, so it is probably flying under the radar.

Insider Ownership Of Research Frontiers

The definition of company insiders can be subjective, and does vary between jurisdictions. Our data reflects individual insiders, capturing board members at the very least. 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.

Most consider insider ownership a positive because it can indicate the board is well aligned with other shareholders. However, on some occasions too much power is concentrated within this group.

Our information suggests that insiders maintain a significant holding in Research Frontiers Incorporated. It has a market capitalization of just US$63m, and insiders have US$20m worth of shares in their own names. It is great to see insiders so invested in the business. It might be worth checking if those insiders have been buying recently.

General Public Ownership

The general public, mostly retail investors, hold a substantial 63% stake in REFR, suggesting it is a fairly popular stock. 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.

Many find it useful to take an in depth look at how a company has performed in the past. You can access this detailed graph of past earnings, revenue and cash flow .

Of course this may not be the best stock to buy. So take a peek at this free free list of interesting companies.

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.