In this article, I will take a quick look at OncoCyte Corporation’s (NYSEMKT:OCX) recent ownership structure – an unconventional investing subject, but an important one. A company’s ownership structure is often linked to its share performance in both the long- and short-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 OCX’s shareholder registry.
Institutional investors transact in large blocks which can influence the momentum of stock prices, at least in the short-term, especially when there is a low level of public shares available on the market to trade. OCX has institutions holding a stake of just 2.19%, which should not be much of a concern in terms of excessive price volatility. But investors should also check whether hedge funds, mostly active investors with a short-term horizon, have a significant stake. They own 18.61% of OCX’s outstanding shares, enough to cause a spike in volatility, at least in the short-term. 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.
I find insiders are an important group of stakeholders, who are directly involved in making key decisions related to the use of capital. In essence, insider ownership is more about the alignment of shareholders’ interests with the management. 24.37% ownership of OCX 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). Another aspect of insider ownership is to learn about their recent transactions. 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
The general public holds a substantial 15.45% stake in OCX, making it a highly popular stock among retail investors. 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.
Private Company Ownership
Another important group of owners for potential investors in OCX are private companies that hold a stake of 0.19% in OCX. These are companies that are mainly invested due to their strategic interests or are incentivized by reaping capital gains on investments their shareholdings. However, an ownership of this size may be relatively insignificant, meaning that these shareholders may not have the potential to influence OCX’s business strategy. Thus, investors not need worry too much about the consequences of these holdings.
Although OCX 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. It is important that OCX 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 determining factor when you’re building an investment thesis for OCX. Rather, you should be examining fundamental factors such as the intrinsic valuation, which is a key driver of OncoCyte’s share price. I urge you to complete your research by taking a look at the following:
- Future Outlook: What are well-informed industry analysts predicting for OCX’s future growth? Take a look at our free research report of analyst consensus for OCX’s outlook.
- Financial Health: Are OCX’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 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.