What does the ownership structure of Adairs Limited (ASX:ADH) look like?
A look at the shareholders of Adairs Limited (ASX:ADH) can tell us which group is the most powerful. Big companies usually have institutions as shareholders, and we usually see insiders owning shares in small companies. Warren Buffett said he likes “a business with enduring competitive advantages that is led by capable, owner-oriented people.” So it’s nice to see some insider ownership, as it may suggest management is owner-driven.
Adairs is not a big company by global standards. It has a market capitalization of A$425 million, which means it wouldn’t get the attention of many institutional investors. Looking at our ownership group data (below), it appears that institutional investors have bought the company. We can zoom in on the different ownership groups, to learn more about Adairs.
See our latest analysis for Adairs
What does institutional ownership tell us about Adairs?
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 own a sizeable portion of Adairs. This implies that analysts working for these institutions have reviewed the stock and like it. But like everyone else, they can be wrong. It is not uncommon to see a sharp decline in the stock price if two large institutional investors attempt to sell a stock at the same time. So it’s worth checking out Adairs’ past revenue trajectory (below). Of course, keep in mind that there are other factors to consider as well.
We note that hedge funds have no significant investment in Adairs. Our data shows that Vinva Investment Management Limited is the largest shareholder with 4.9% of shares outstanding. Meanwhile, the second and third largest shareholders hold 4.9% and 4.8% of the outstanding shares respectively.
After digging a little deeper, we found that the top 22 held combined ownership of 50% of the company, suggesting that no single shareholder has significant control over the company.
While studying the institutional ownership of a company can add value to your research, it is also recommended that you research analyst recommendations to better understand a stock’s expected performance. There are plenty of analysts covering the stock, so it might be interesting to see what they are predicting as well.
Adairs Insider Property
While the precise definition of an insider can be subjective, almost everyone considers board members to be insiders. The management of the company answers to the board of directors and the latter must represent the interests of the shareholders. In particular, sometimes the senior executives themselves sit on the board of directors.
Insider ownership is positive when it signals that executives think like the true owners of the company. However, strong insider ownership can also give immense power to a small group within the company. This can be negative in certain circumstances.
We can see that insiders hold shares in Adairs Limited. As individuals, insiders collectively own A$25 million of the A$425 million company. Some would say this shows the alignment of interests between shareholders and the board. But it might be worth checking to see if these insiders have sold.
General public property
The general public, including retail investors, owns 48% of the company’s shares and therefore cannot be easily ignored. This size of ownership, although considerable, may not be sufficient to change company policy if the decision is not in line with other major shareholders.
While it is worth considering the different groups that own a business, there are other, even more important factors. Take for example the ubiquitous specter of investment risk. We have identified 4 warning signs with Adairs and understanding them should be part of your investment process.
But finally it’s the future, not the past, which will determine the performance of the owners of this company. Therefore, we think it’s advisable to take a look at this free report showing whether analysts are predicting a brighter future.
NB: The figures in this article are calculated using trailing twelve month data, which refers to the 12 month period ending on the last day of the month in which the financial statements are dated. This may not be consistent with the annual report figures for the full year.
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This Simply Wall St article is general in nature. We provide commentary based on historical data and analyst forecasts only using unbiased methodology and our articles are not intended to be financial advice. It is not a recommendation to buy or sell stocks and does not take into account your objectives or financial situation. Our goal is to bring you targeted long-term analysis based on fundamental data. Note that our analysis may not take into account the latest announcements from price-sensitive companies or qualitative materials. Simply Wall St has no position in the stocks mentioned.