In this article, I’m going to take a look at Comstock Holding Companies Inc’s (NASDAQ:CHCI) latest ownership structure, a non-fundamental factor which is important, but remains a less discussed subject among investors. Ownership structure has been found to have an impact on shareholder returns in both short- and long-term. 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 CHCI’s shareholder registry.
Institutional investors are one of the largest group of market participants and their buy-sell decisions on a company’s stock can significantly impact prices, more so, when there are relatively small amounts of shares available on the market to trade. Generally, an institutional ownership of 1.87%, in the case of CHCI, should not concern investors in terms of high stock volatility. But another factor to consider is the presence of hedge funds, who are notorious for active investing. In CHCI’s case, they make up 5.99% of ownership, indicating potential sharp stock price movements during significant transactions. I am going to further examine the stock’s other major shareholders to figure out how they can affect the company’s investment profile for the long-term investor.
Another important group of shareholders are company insiders. Insider ownership has to do more with how the company is managed and less to do with the direct impact of the magnitude of shares trading on the market. A major group of owners of CHCI is individual insiders, sitting with a hefty 55.69% stake in the company. Broadly, insider ownership of this level has been found to negatively affect companies with consistently low PE ratio (underperforming). And a positive impact has been seen on companies with a high PE ratio (outperforming). Another aspect of insider ownership is to learn about their recent transactions. While insider buying is possibly a sign of a positive outlook for the company, selling doesn’t necessarily indicate a negative outlook as they may be selling to meet personal financial needs.
General Public Ownership
A big stake of 36.45% in CHCI 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.
Although CHCI has a low level of overall institutional ownership, active hedge funds still have a significant stake in the company. This level of ownership is a non-fundamental factor that can impact stock prices in the short-term. An investment in CHCI should come with enough margin of safety in order to avoid significant dips in shareholding value. However, ownership structure should not be the only determining factor when you’re building an investment thesis for CHCI. Rather, you should be examining fundamental factors such as Comstock Holding Companies’s past track record and financial health. I highly recommend you to complete your research by taking a look at the following:
- Financial Health: Is CHCI’s operations financially sustainable? Balance sheets can be hard to analyze, which is why we’ve done it for you. Check out our financial health checks here.
- Past Track Record: Has CHCI been consistently performing well irrespective of the ups and downs in the market? Go into more detail in the past performance analysis and take a look at the free visual representations of CHCI’s historicals for more clarity.
- Other High-Performing Stocks: Are there other stocks that provide better prospects with proven track records? Explore our free list of these great stocks here.
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.