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The big shareholder groups in DXP Enterprises, Inc. (NASDAQ:DXPE) have power over the company. Insiders often own a large chunk of younger, smaller, companies while huge companies tend to have institutions as shareholders. I quite like to see at least a little bit of insider ownership. As Charlie Munger said 'Show me the incentive and I will show you the outcome.
With a market capitalization of US$357m, DXP Enterprises is a small cap stock, so it might not be well known by many institutional investors. Taking a look at our data on the ownership groups (below), it's seems that institutional investors have bought into the company. We can zoom in on the different ownership groups, to learn more about DXP Enterprises.
What Does The Institutional Ownership Tell Us About DXP Enterprises?
Many institutions measure their performance against an index that approximates the local market. So they usually pay more attention to companies that are included in major indices.
DXP Enterprises already has institutions on the share registry. Indeed, they own a respectable stake in the company. This implies the analysts working for those institutions have looked at the stock and they like it. But just like anyone else, they could be wrong. When multiple institutions own a stock, there's always a risk that they are in a 'crowded trade'. When such a trade goes wrong, multiple parties may compete to sell stock fast. This risk is higher in a company without a history of growth. You can see DXP Enterprises's historic earnings and revenue, below, but keep in mind there's always more to the story.
Institutional investors own over 50% of the company, so together than can probably strongly influence board decisions. It looks like hedge funds own 9.0% of DXP Enterprises shares. That catches my attention because hedge funds sometimes try to influence management, or bring about changes that will create near term value for shareholders. BlackRock, Inc. is currently the largest shareholder, with 15% of shares outstanding. In comparison, the second and third largest shareholders hold about 9.0% and 7.4% of the stock. David Little, who is the third-largest shareholder, also happens to hold the title of Chairman of the Board.
We also observed that the top 7 shareholders account for more than half of the share register, with a few smaller shareholders to balance the interests of the larger ones to a certain extent.
While it makes sense to study institutional ownership data for a company, it also makes sense to study analyst sentiments to know which way the wind is blowing. While there is some analyst coverage, the company is probably not widely covered. So it could gain more attention, down the track.
Insider Ownership Of DXP Enterprises
While the precise definition of an insider can be subjective, almost everyone considers board members to be insiders. Management ultimately answers to the board. However, it is not uncommon for managers to be executive board members, especially if they are a founder or the CEO.
Insider ownership is positive when it signals leadership are thinking like the true owners of the company. However, high insider ownership can also give immense power to a small group within the company. This can be negative in some circumstances.
We can see that insiders own shares in DXP Enterprises, Inc.. It has a market capitalization of just US$357m, and insiders have US$30m worth of shares, in their own names. It is good to see some investment by insiders, but it might be worth checking if those insiders have been buying.
General Public Ownership
The general public holds a 14% stake in DXPE. While this group can't necessarily call the shots, it can certainly have a real influence on how the company is run.
I find it very interesting to look at who exactly owns a company. But to truly gain insight, we need to consider other information, too. Be aware that DXP Enterprises is showing 4 warning signs in our investment analysis , and 2 of those are significant...
If you are like me, you may want to think about whether this company will grow or shrink. Luckily, you can check this free report showing analyst forecasts for its future.
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.
This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
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