In this analysis, my focus will be on developing a perspective on Halliburton Company’s (NYSE:HAL) latest ownership structure, a less discussed, but important factor. The impact of a company’s ownership structure affects both its short- and long-term performance. Since the same amount of capital coming from an activist institution and a passive mutual fund has different implications on corporate governance, it is a useful exercise to deconstruct HAL’s shareholder registry.
Institutions account for 82.03% of HAL’s outstanding shares, a significant enough holding to move stock prices if they start buying and selling in large quantities, especially when there are relatively small amounts of shares available on the market to trade. Although HAL 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. For shareholders in HAL, sharp price movements may not be a major concern as active hedge funds hold a relatively small stake in the company. Although this doesn’t necessarily lead to high short-term volatility, we should dig deeper into HAL’s ownership structure to find how the remaining owner types can affect its investment profile.
Insiders form another 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. A stake of less than 1% in HAL is relatively small, though at least there is still some alignment of interest with shareholders. A higher level of insider ownership has been found to reflect the choosing of projects with higher return on investments compared to lower returning projects for the sake of expansion. It would also be interesting to check what insiders have been doing with their shareholding recently. Insider buying can be a positive indicator of future performance, but a selling decision can be simply driven by personal financial requirements.
General Public Ownership
A big stake of 17.68% in HAL 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.
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, if you are building an investment case for HAL, ownership structure alone should not dictate your decision to buy or sell the stock. Rather, you should be looking at fundamental drivers such as the intrinsic valuation, which is a key driver of Halliburton’s share price. I highly recommend you to complete your research by taking a look at the following:
- Future Outlook: What are well-informed industry analysts predicting for HAL’s future growth? Take a look at our free research report of analyst consensus for HAL’s outlook.
- Past Track Record: Has HAL 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 HAL’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.