Could Australian Vanadium Limited's (ASX:AVL) Investor Composition Influence The Stock Price?

Simply Wall St

Fri, Aug 23, 2019, 6:45 PM

If you want to know who really controls Australian Vanadium Limited (ASX:AVL), then you'll have to look at the makeup of its share registry. Large companies usually have institutions as shareholders, and we usually see insiders owning shares in 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.

Australian Vanadium is a smaller company with a market capitalization of AU$24m, so it may still be flying under the radar of many institutional investors. In the chart below below, we can see that institutional investors have not yet purchased shares. Let's delve deeper into each type of owner, to discover more about AVL.

Check out our latest analysis for Australian Vanadium

ASX:AVL Ownership Summary, August 24th 2019

What Does The Lack Of Institutional Ownership Tell Us About Australian Vanadium?

We don't tend to see institutional investors holding stock of companies that are very risky, thinly traded, or very small. Though we do sometimes see large companies without institutions on the register, it's not particularly common.

There are multiple explanations for why institutions don't own a stock. The most common is that the company is too small relative to fund under management, so the institition does not bother to look closely at the company. It is also possible that fund managers don't own the stock because they aren't convinced it will perform well. Institutional investors may not find the historic growth of the business impressive, or there might be other factors at play. You can see the past revenue performance of Australian Vanadium, for yourself, below.

ASX:AVL Income Statement, August 24th 2019

We note that hedge funds don't have a meaningful investment in Australian Vanadium. Our information suggests that there isn't any analyst coverage of the stock, so it is probably little known.

Insider Ownership Of Australian Vanadium

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.

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.

We can see that insiders own shares in Australian Vanadium Limited. As individuals, the insiders collectively own AU$2.1m worth of the AU$24m company. 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

The general public -- mostly retail investors -- own 87% of Australian Vanadium . With this size of ownership, retail investors can collectively play a role in decisions that affect shareholder returns, such as dividend policies and the appointment of directors. They can also exercise the power to decline an acquisition or merger that may not improve profitability.

Private Company Ownership

We can see that Private Companies own 4.2%, of the shares on issue. It's hard to draw any conclusions from this fact alone, so its worth looking into who owns those private companies. Sometimes insiders or other related parties have an interest in shares in a public company through a separate private company.

Next Steps:

While it is well worth considering the different groups that own a company, there are other factors that are even more important.

I like to dive deeper into how a company has performed in the past. You can access this interactive graph of past earnings, revenue and cash flow for free .

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.

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. 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. Simply Wall St has no position in the stocks mentioned. Thank you for reading.

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