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I am going to take a deep dive into Oxbridge Re Holdings Limited’s (NASDAQ:OXBR) most recent ownership structure, not a frequent subject of discussion among individual investors. Ownership structure of a company has been found to affect share performance over time. 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 OXBR’s shareholder registry.
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. Generally, an institutional ownership of 6.51%, in the case of OXBR, 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 OXBR’s case, they make up 9.14% of ownership, indicating potential sharp stock price movements during significant transactions. However, I would explore its ownership registry in more detail to check how other ownership types affect its investment case 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 OXBR is individual insiders, sitting with a hefty 16.35% 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). It may be interesting to take a look at what company insiders have been doing with their holdings lately. 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 substantial ownership of 56.14% in OXBR is held by the general public. This size of ownership gives retail investors collective power in deciding on major policy decisions such as executive compensation, appointment of directors and acquisitions of businesses. This level of ownership gives retail investors the power to sway key policy decisions such as board composition, executive compensation, and potential acquisitions. This is a positive sign for an investor who wants to be involved in key decision-making of the company.
Private Company Ownership
Another important group of owners for potential investors in OXBR are private companies that hold a stake of 5.96% in OXBR. These are companies that are mainly invested due to their strategic interests or are incentivized by reaping capital gains on investments their shareholdings. An ownership of this size indicates a strong financial backing and has the potential to influence OXBR’s business strategy. Thus, investors should dig deeper into OXBR’s business relations with these companies and how it can affect shareholder returns in the long-term.
While OXBR has a low level of institutional ownership, active hedge funds still hold a significant stake in the company. Their ownership is a non-fundamental factor, which can impact OXBR’s price volatility in the short-term, considering this group investors may come under pressure to deliver in the short term. It is important that OXBR offers enough margin of safety in order to avoid a significant portfolio impact resulting from a sustained sell-off and drop in share value. However, ownership structure should not be the only focus of your research when constructing an investment thesis around OXBR. Rather, you should be looking at fundamental drivers such as the intrinsic valuation, which is a key driver of Oxbridge Re Holdings’s share price. I urge you to complete your research by taking a look at the following:
Financial Health: Is OXBR’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.
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.