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Could Goldstar Minerals Inc’s (CVE:GDM) Investor Composition Impacts Your Returns?

The big shareholder groups in Goldstar Minerals Inc (CVE:GDM) 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.’

Goldstar Minerals is a smaller company with a market capitalization of CA$4.7m, so it may still be flying under the radar of many institutional investors. In the chart below below, we can see that institutions are not really that prevalent on the share registry. We can zoom in on the different ownership groups, to learn more about GDM.

View our latest analysis for Goldstar Minerals

TSXV:GDM Ownership Summary October 1st 18
TSXV:GDM Ownership Summary October 1st 18

What Does The Lack Of Institutional Ownership Tell Us About Goldstar Minerals?

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.

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There are many reasons why a company might not have any institutions on the share registry. It may be hard for institutions to buy large amounts of shares, if liquidity (the amount of shares traded each day) is low. If the company has not needed to raise capital, institutions might lack the opportunity to build a position. On the other hand, it’s always possible that professional investors are avoiding a company because they don’t think it’s the best place for their money. 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 Goldstar Minerals, for yourself, below.

TSXV:GDM Income Statement Export October 1st 18
TSXV:GDM Income Statement Export October 1st 18

We note that hedge funds don’t have a meaningful investment in Goldstar Minerals. As far I can tell there isn’t analyst coverage of the company, so it is probably flying under the radar.

Insider Ownership Of Goldstar Minerals

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.

I generally consider insider ownership to be a good thing. However, on some occasions it makes it more difficult for other shareholders to hold the board accountable for decisions.

Our information suggests that insiders own more than half of Goldstar Minerals Inc. This gives them effective control of the company. That means they own CA$2.7m worth of shares in the CA$4.7m company. That’s quite meaningful. It is good to see this level of investment. You can check here to see if those insiders have been buying recently.

General Public Ownership

The general public, with a 42.6% stake in the company, will not easily be ignored. This size of ownership, while considerable, may not be enough to change company policy if the decision is not in sync with other large shareholders.

Next Steps:

It’s always worth thinking about the different groups who own shares in a company. But to understand Goldstar Minerals better, we need to consider many other factors.

Many find it useful to take an in depth look at how a company has performed in the past. You can access this detailed graph of past earnings, revenue and cash flow .

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.

To help readers see past 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. For errors that warrant correction please contact the editor at editorial-team@simplywallst.com.