What You Must Know About Brookfield Business Partners LP.’s (TSE:BBU.UN) Major Investors

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Bruce Howe

Updated Sat, Apr 28, 2018, 4:26 PM

In this analysis, my focus will be on developing a perspective on Brookfield Business Partners LP.’s (TSX:BBU.UN) latest ownership structure, a less discussed, but important factor. The impact of a company’s ownership structure affects both its short- and long-term performance. Since the effect of an active institutional investor with a similar ownership as a passive pension-fund can be vastly different on a company’s corporate governance and accountability of shareholders, investors should take a closer look at BBU.UN’s shareholder registry.

View our latest analysis for Brookfield Business Partners

TSX:BBU.UN Ownership_summary Apr 28th 18

Institutional Ownership

BBU.UN’s 88.67% institutional ownership seems enough to cause large share price movements in the case of significant share sell-off or acquisitions by institutions, particularly when there is a low level of public shares available on the market to trade. However, as not all institutions are alike, such high volatility events, especially in the short-term, have been more frequently linked to active market participants like hedge funds. For shareholders in BBU.UN, sharp price movements may not be a major concern as active hedge funds hold a relatively small stake in the company. Although this doesn’t necessarily lead to high short-term volatility, we should dig deeper into BBU.UN’s ownership structure to find how the remaining owner types can affect its investment profile.

Insider Ownership

I find insiders are another important group of stakeholders, who are directly involved in making key decisions related to the use of capital. In essence, insider ownership is more about the alignment of shareholders’ interests with the management. A stake of less than 1% in BBU.UN is relatively small, though at least there is still some alignment of interest with shareholders. A higher level of insider ownership has been found to reflect the choosing of projects with higher return on investments compared to lower returning projects for the sake of expansion. I will also like to check what insiders have been doing recently with their holdings. Insider buying may be a sign of upbeat future expectations, however, selling doesn’t necessarily mean the opposite as insiders may be motivated by their personal financial needs.

General Public Ownership

A big stake of 11.27% in BBU.UN is held by the general public. With this size of ownership, retail investors can collectively play a role in major company policies that affect shareholders returns, including executive remuneration 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

Another important group of owners for potential investors in BBU.UN are private companies that hold a stake of 0.013% in BBU.UN. These are companies that are mainly invested due to their strategic interests or are incentivized by reaping capital gains on investments their shareholdings. However, an ownership of this size may be relatively insignificant, meaning that these shareholders may not have the potential to influence BBU.UN’s business strategy. Thus, investors not need worry too much about the consequences of these holdings.

Next Steps:

The company’s high institutional ownership makes margin of safety a very important consideration to existing investors since long bull and bear trends often emerge when these big-ticket investors see a change in long-term potential of the company. This will enable shareholders to comfortably invest in the company while avoid getting trapped in a sustained sell-off that is often observed in stocks with this level of institutional participation. However, ownership structure should not be the only focus of your research when constructing an investment thesis around BBU.UN. Rather, you should be examining fundamental factors such as Brookfield Business Partners’s past track record and financial health. I urge you to complete your research by taking a look at the following:

Future Outlook: What are well-informed industry analysts predicting for BBU.UN’s future growth? Take a look at our free research report of analyst consensus for BBU.UN’s outlook.
Past Track Record: Has BBU.UN been consistently performing well irrespective of the ups and downs in the market? Go into more detail in the past performance analysis and take a look at the free visual representations of BBU.UN’s historicals for more clarity.
Other High-Performing Stocks: Are there other stocks that provide better prospects with proven track records? Explore our free list of these great stocks here.

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.
To help readers see pass the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price sensitive company announcements.

The author is an independent contributor and at the time of publication had no position in the stocks mentioned.