I am going to take a deep dive into Peyto Exploration & Development Corp’s (TSE:PEY) most recent ownership structure, not a frequent subject of discussion among individual investors. Ownership structure has been found to have an impact on shareholder returns in both short- and long-term. 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 PEY’s shareholder registry.
PEY’s 64.31% 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. These moves, at least in the short-term, are generally observed in an institutional ownership mix comprising of active stock pickers, in particular levered hedge funds, which can cause large price swings. For PEY shareholders, the potential of this type of share price volatility shouldn’t be as concerning as hedge fund ownership is is not significant,indicating few chances of such sudden price moves. While that hardly seems concerning, I will explore further into PEY’s ownership type to find out how it can affect the company’s investment profile.
An important group of shareholders are company insiders. Insider ownership has to do more with how the company is managed and less to do with the direct impact of the magnitude of shares trading on the market. PEY insiders hold a not-so-significant 2.95% stake in the company, which somewhat aligns their interests with that of shareholders. However, a higher level of insider ownership has been linked to management executing on high-returning projects instead of expansion projects for the sake of apparent growth. 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
The general public holds a substantial 32.74% stake in PEY, making it a highly popular stock among retail investors. This size of ownership gives retail investors collective power in deciding on major policy decisions such as executive compensation, appointment of directors and acquisitions of businesses.
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 determining factor when you’re building an investment thesis for PEY. Instead, you should be evaluating company-specific factors such as Peyto Exploration & Development’s past track record and financial health. I highly recommend you to complete your research by taking a look at the following:
- Future Outlook: What are well-informed industry analysts predicting for PEY’s future growth? Take a look at our free research report of analyst consensus for PEY’s outlook.
- Past Track Record: Has PEY 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 PEY’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 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 email@example.com.