In this article, I will take a quick look at Art’s-Way Manufacturing Co Inc.’s (NASDAQ:ARTW) recent ownership structure – an unconventional investing subject, but an important one. Ownership structure has been found to have an impact on shareholder returns in both short- and long-term. Since the effect of an active institutional investor with a similar ownership as a passive pension-fund can be vastly different on a company’s corporate governance and accountability of shareholders, investors should take a closer look at ARTW’s shareholder registry.
Due to the big order sizes of institutional investors, a company’s shares can experience large, one-sided momentum, driven by high volume of shares removed from, or injected into, the market. With an institutional ownership of 9.10%, ARTW doesn’t seem too exposed to higher volatility resulting from institutional trading.
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. ARTW insiders hold a significant stake of 50.14% in the company. This level of insider ownership has been found to have a negative impact on companies with consistently low PE ratios (underperformers), while it has been positive in the case of high PE ratio firms (outperformers). 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 big stake of 40.77% in ARTW 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.
Institutional ownership in ARTW is not at a level that would concern investors. We are less likely to see sustained downtrends or significant volatility resulting from large institutional trading. However, ownership structure should not be the only determining factor when you’re building an investment thesis for ARTW. Instead, you should be evaluating company-specific factors such as the intrinsic valuation, which is a key driver of Art’s-Way Manufacturing’s share price. I urge you to complete your research by taking a look at the following:
- Financial Health: Is ARTW’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.
- Past Track Record: Has ARTW 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 ARTW’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.