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A look at the shareholders of FAR Limited (ASX:FAR) can tell us which group is most powerful. Institutions often own shares in more established companies, while it's not unusual to see insiders own a fair bit of smaller companies. Warren Buffett said that he likes "a business with enduring competitive advantages that is run by able and owner-oriented people." So it's nice to see some insider ownership, because it may suggest that management is owner-oriented.
With a market capitalization of AU$137m, FAR is a small cap stock, so it might not be well known by many institutional investors. Our analysis of the ownership of the company, below, shows that institutions own shares in the company. Let's take a closer look to see what the different types of shareholders can tell us about FAR.
What Does The Institutional Ownership Tell Us About FAR?
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.
As you can see, institutional investors have a fair amount of stake in FAR. 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 FAR's earnings history below. Of course, the future is what really matters.
We note that hedge funds don't have a meaningful investment in FAR. Our data shows that Meridian Capital International Fund is the largest shareholder with 15% of shares outstanding. With 12% and 5.2% of the shares outstanding respectively, Orbis Investment Management Limited and Farjoy Pty Ltd are the second and third largest shareholders.
A closer look at our ownership figures suggests that the top 20 shareholders have a combined ownership of 50% implying that no single shareholder has a majority.
While studying institutional ownership for a company can add value to your research, it is also a good practice to research analyst recommendations to get a deeper understand of a stock's expected performance. As far I can tell there isn't analyst coverage of the company, so it is probably flying under the radar.
Insider Ownership Of FAR
The definition of company insiders can be subjective and does vary between jurisdictions. Our data reflects individual insiders, capturing board members at the very least. Company management run the business, but the CEO will answer to the board, even if he or she is a member of it.
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.
I can report that insiders do own shares in FAR Limited. It has a market capitalization of just AU$137m, and insiders have AU$7.1m worth of shares, in their own names. This shows at least some alignment, but I usually like to see larger insider holdings. You can click here to see if those insiders have been buying or selling.
General Public Ownership
With a 50% ownership, the general public have some degree of sway over FAR. While this size of ownership may not be enough to sway a policy decision in their favour, they can still make a collective impact on company policies.
Private Equity Ownership
With a stake of 15%, private equity firms could influence the FAR board. Some investors might be encouraged by this, since private equity are sometimes able to encourage strategies that help the market see the value in the company. Alternatively, those holders might be exiting the investment after taking it public.
Private Company Ownership
We can see that Private Companies own 5.9%, of the shares on issue. Private companies may be related parties. Sometimes insiders have an interest in a public company through a holding in a private company, rather than in their own capacity as an individual. While it's hard to draw any broad stroke conclusions, it is worth noting as an area for further research.
It's always worth thinking about the different groups who own shares in a company. But to understand FAR better, we need to consider many other factors. Consider for instance, the ever-present spectre of investment risk. We've identified 2 warning signs with FAR , and understanding them should be part of your investment process.
Of course this may not be the best stock to buy. Therefore, you may wish to see our free collection of interesting prospects boasting favorable financials.
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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