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If you want to know who really controls American Software, Inc. (NASDAQ:AMSW.A), then you'll have to look at the makeup of its share registry. Institutions will often hold stock in bigger companies, and we expect to see insiders owning a noticeable percentage of the smaller ones. I generally like to see some degree of insider ownership, even if only a little. As Nassim Nicholas Taleb said, 'Don’t tell me what you think, tell me what you have in your portfolio.
American Software is a smaller company with a market capitalization of US$436m, so it may still be flying under the radar of many institutional investors. Taking a look at our data on the ownership groups (below), it seems that institutional investors have bought into the company. Let's take a closer look to see what the different types of shareholders can tell us about American Software.
What Does The Institutional Ownership Tell Us About American Software?
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.
We can see that American Software does have institutional investors; and they hold a good portion of the company's stock. This can indicate that the company has a certain degree of credibility in the investment community. However, it is best to be wary of relying on the supposed validation that comes with institutional investors. They too, get it wrong sometimes. If multiple institutions change their view on a stock at the same time, you could see the share price drop fast. It's therefore worth looking at American Software's earnings history below. Of course, the future is what really matters.
Institutional investors own over 50% of the company, so together than can probably strongly influence board decisions. It would appear that 6.4% of American Software shares are controlled by hedge funds. That catches my attention because hedge funds sometimes try to influence management, or bring about changes that will create near term value for shareholders. The company's largest shareholder is Brown Capital Management, LLC, with ownership of 11%. With 7.6% and 6.9% of the shares outstanding respectively, Kayne Anderson Rudnick Investment Management, LLC and BlackRock, Inc. are the second and third largest shareholders.
We also observed that the top 9 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.
Researching institutional ownership is a good way to gauge and filter a stock's expected performance. The same can be achieved by studying analyst sentiments. There are a reasonable number of analysts covering the stock, so it might be useful to find out their aggregate view on the future.
Insider Ownership Of American Software
The definition of an insider can differ slightly between different countries, but members of the board of directors always count. The company management answer to the board and the latter should represent the interests of shareholders. Notably, sometimes top-level managers are on the board themselves.
Most consider insider ownership a positive because it can indicate the board is well aligned with other shareholders. However, on some occasions too much power is concentrated within this group.
I can report that insiders do own shares in American Software, Inc.. It has a market capitalization of just US$436m, and insiders have US$28m worth of shares, in their own names. This shows at least some alignment. You can click here to see if those insiders have been buying or selling.
General Public Ownership
The general public holds a 13% stake in American Software. This size of ownership, while considerable, may not be enough to change company policy if the decision is not in sync with other large shareholders.
While it is well worth considering the different groups that own a company, there are other factors that are even more important. Case in point: We've spotted 3 warning signs for American Software you should be aware of.
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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