Why Neptune Technologies & Bioressources Inc’s (TSE:NEPT) Investor Composition Impacts Your Returns
Today, I will be analyzing Neptune Technologies & Bioressources Inc’s (TSE:NEPT) recent ownership structure, an important but not-so-popular subject among individual investors. 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 NEPT’s shareholder registry.
View our latest analysis for Neptune Technologies & Bioressources
Institutional Ownership
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 a not-so-big institutional ownership of 7.47%, NEPT is not too exposed to price volatility that may arise from institutional trading. But another factor to consider is the presence of hedge funds, who are notorious for active investing. In NEPT’s case, they make up 10.57% of ownership, indicating potential sharp stock price movements during significant transactions. However, I would also examine the rest of its ownership structure in more detail to determine how the company’s major shareholders can affect its investment case.
Insider Ownership
An important group of shareholders are company insiders. Insider ownership has to do more with how the company is managed and less to do with the direct impact of the magnitude of shares trading on the market. 19.84% ownership of NEPT insiders is large enough to make an impact on shareholder returns. In general, this level of insider ownership has negatively affected underperforming (consistently low PE ratio) companies and positively affected the companies that outperform (consistently high PE ratio). It may be interesting to take a look at what company insiders have been doing with their holdings 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 61.32% stake in NEPT, making it a highly popular stock among retail investors. 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.
Private Company Ownership
Potential investors in NEPT should also look at another important group of investors: private companies, with a stake of 0.80%, who are primarily invested because of strategic and capital gain interests. However, an ownership of this size may be relatively insignificant, meaning that these shareholders may not have the potential to influence NEPT’s business strategy. Thus, investors not need worry too much about the consequences of these holdings.
Next Steps:
While NEPT has a low level of institutional ownership, active hedge funds still hold a significant stake in the company. The participation of these active investors has been linked to the volatile nature of share prices. A factor to consider is whether NEPT offers enough margin of safety compared to its intrinsic value. However, if you are building an investment case for NEPT, ownership structure alone should not dictate your decision to buy or sell the stock. Rather, you should be examining fundamental factors such as Neptune Technologies & Bioressources’s past track record and financial health. I urge you to complete your research by taking a look at the following:
Financial Health: Are NEPT’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 NEPT 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 NEPT’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 past 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. For errors that warrant correction please contact the editor at editorial-team@simplywallst.com.
