Do Insiders Own Lots Of Shares In Tamawood Limited (ASX:TWD)?

Simply Wall St

Tue, Jul 9, 2019, 11:35 PM

Every investor in Tamawood Limited (ASX:TWD) should be aware of the most powerful shareholder groups. 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.

Tamawood is not a large company by global standards. It has a market capitalization of AU$99m, which means it wouldn't have the attention of many institutional investors. Taking a look at our data on the ownership groups (below), it's seems that institutions are noticeable on the share registry. Let's take a closer look to see what the different types of shareholder can tell us about TWD.

See our latest analysis for Tamawood

ASX:TWD Ownership Summary, July 10th 2019

What Does The Institutional Ownership Tell Us About Tamawood?

Institutional investors commonly compare their own returns to the returns of a commonly followed index. So they generally do consider buying larger companies that are included in the relevant benchmark index.

Tamawood already has institutions on the share registry. Indeed, they own 6.2% of the company. This implies the analysts working for those institutions have looked at the stock and they like it. But just like anyone else, they could be wrong. When multiple institutions own a stock, there's always a risk that they are in a 'crowded trade'. When such a trade goes wrong, multiple parties may compete to sell stock fast. This risk is higher in a company without a history of growth. You can see Tamawood's historic earnings and revenue, below, but keep in mind there's always more to the story.

ASX:TWD Income Statement, July 10th 2019

Tamawood is not owned by hedge funds. Our information suggests that there isn't any analyst coverage of the stock, so it is probably little known.

Insider Ownership Of Tamawood

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. Management ultimately answers to the board. However, it is not uncommon for managers to be executive board members, especially if they are a founder or the CEO.

Most consider insider ownership a positive because it can indicate the board is well aligned with other shareholders. However, on some occasions too much power is concentrated within this group.

It seems that insiders own more than half the Tamawood Limited stock. This gives them a lot of power. So they have a AU$58m stake in this AU$99m business. Most would argue this is a positive, showing strong alignment with shareholders. You can click here to see if those insiders have been buying or selling.

General Public Ownership

With a 31% ownership, the general public have some degree of sway over TWD. 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 Company Ownership

We can see that Private Companies own 4.7%, 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 always like to check for a history of revenue growth. You can too, by accessing this free chart of historic revenue and earnings in this detailed graph.

Of course this may not be the best stock to buy. So take a peek at this free free list of interesting companies.

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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