Today, I will be analyzing adesso AG’s (FRA:ADN1) recent ownership structure, an important but not-so-popular subject among individual investors. A company’s ownership structure is often linked to its share performance in both the long- and short-term. Different types of investors can have varying degrees of influence on a company’s management team. For example, an active institutional investor may be more likely to hold a company accountable for certain actions whereas a passive fund will move in and out of stocks without regards to corporate governance. The implications of these institutions’ actions can either benefit or hinder individual investors, so it is important to understand the ownership composition of your stock investment. Therefore, I will take a look at ADN1’s shareholders in more detail.
ADN1’s 12.1% institutional ownership seems enough to cause large share price movements in the case of significant share sell-off or acquisitions by institutions, particularly when there is a low level of public shares available on the market to trade. Although ADN1 has a high institutional ownership, such stock moves, in the short-term, are more commonly linked to a particular type of active institutional investors – hedge funds. In the case of ADN1, investors need not worry about such volatility considering active hedge funds don’t have a significant stake. However, we should dig deeper into ADN1’s ownership structure and find out how other key ownership classes can affect its investment profile.
Insiders form a group of important ownership types as they manage the company’s operations and decide the best use of capital. Insider ownership has been linked to better alignment between management and shareholders. 61.3% ownership of ADN1 insiders is large enough to make an impact on shareholder returns. In general, this level of insider ownership has negatively affected underperforming (consistently low PE ratio) companies and positively affected the companies that outperform (consistently high PE ratio). It may be interesting to take a look at what company insiders have been doing with their holdings lately. Insider buying may be a sign of upbeat future expectations, however, selling doesn’t necessarily mean the opposite as insiders may be motivated by their personal financial needs.
General Public Ownership
A substantial ownership of 26.6% in ADN1 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.
The company’s high institutional ownership makes margin of safety a very important consideration to existing investors since long bull and bear trends often emerge when these big-ticket investors see a change in long-term potential of the company. This will allow investors to reduce the impact of non-fundamental factors, such as volatile block trading impact on their portfolio value. However, ownership structure should not be the only determining factor when you’re building an investment thesis for ADN1. Rather, you should be looking at fundamental drivers such as adesso’s past track record and financial health. I urge you to complete your research by taking a look at the following:
- Future Outlook: What are well-informed industry analysts predicting for ADN1’s future growth? Take a look at our free research report of analyst consensus for ADN1’s outlook.
- Past Track Record: Has ADN1 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 ADN1’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 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 email@example.com.