The big shareholder groups in Innovative Tyres & Tubes Limited (NSE:INNOVATIVE) have power over the company. Large companies usually have institutions as shareholders, and we usually see insiders owning shares in smaller companies. I quite like to see at least a little bit of insider ownership. As Charlie Munger said 'Show me the incentive and I will show you the outcome.'
Innovative Tyres & Tubes is not a large company by global standards. It has a market capitalization of ₹418m, which means it wouldn't have the attention of 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 shareholder can tell us about INNOVATIVE.
See our latest analysis for Innovative Tyres & Tubes
What Does The Institutional Ownership Tell Us About Innovative Tyres & Tubes?
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.
Innovative Tyres & Tubes already has institutions on the share registry. Indeed, they own 6.1% of the company. This suggests some credibility amongst professional investors. But we can't rely on that fact alone, since institutions make bad investments sometimes, just like everyone does. 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 Innovative Tyres & Tubes's historic earnings and revenue, below, but keep in mind there's always more to the story.
We note that hedge funds don't have a meaningful investment in Innovative Tyres & Tubes. Our information suggests that there isn't any analyst coverage of the stock, so it is probably little known.
Insider Ownership Of Innovative Tyres & Tubes
While the precise definition of an insider can be subjective, almost everyone considers board members to be insiders. 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.