Why Deswell Industries Inc’s (NASDAQ:DSWL) Investor Composition Impacts Your Returns
I am going to take a deep dive into Deswell Industries Inc’s (NASDAQ:DSWL) most recent ownership structure, not a frequent subject of discussion among individual investors. Ownership structure has been found to have an impact on shareholder returns in both short- and long-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 DSWL’s shareholder registry.
Check out our latest analysis for Deswell Industries
Institutional Ownership
Institutional investors typically buy and sell shares in large magnitudes which can significantly sway the share price, especially when there are relatively small amounts of shares available on the market to trade. With an institutional ownership of 4.92%, DSWL doesn’t seem too exposed to higher volatility resulting from institutional trading.
Insider Ownership
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 major group of owners of DSWL is individual insiders, sitting with a hefty 55.82% stake in the company. Broadly, insider ownership of this level has been found to negatively affect companies with consistently low PE ratio (underperforming). And a positive impact has been seen on companies with a high PE ratio (outperforming). It’s also interesting to learn what DSWL insiders have been doing with their shareholdings lately. Insiders buying company shares can be a positive indicator of future performance, but a selling decision can simply be driven by personal financial needs.
General Public Ownership
The general public holds a substantial 39.26% stake in DSWL, 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. This level of ownership gives retail investors the power to sway key policy decisions such as board composition, executive compensation, and potential acquisitions. This is a positive sign for an investor who wants to be involved in key decision-making of the company.
Next Steps:
Institutional ownership in DSWL 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, if you are building an investment case for DSWL, 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 Deswell Industries’s share price. I highly recommend you to complete your research by taking a look at the following:
Financial Health: Is DSWL’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 DSWL 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 DSWL’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.
