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If you want to know who really controls L.B. Foster Company (NASDAQ:FSTR), then you'll have to look at the makeup of its share registry. Generally speaking, as a company grows, institutions will increase their ownership. Conversely, insiders often decrease their ownership over time. 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.
With a market capitalization of US$186m, L.B. Foster is a small cap stock, so it might not be well known by many institutional investors. In the chart below, we can see that institutions own shares in the company. Let's delve deeper into each type of owner, to discover more about L.B. Foster.
What Does The Institutional Ownership Tell Us About L.B. Foster?
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.
As you can see, institutional investors have a fair amount of stake in L.B. Foster. This can indicate that the company has a certain degree of credibility in the investment community. However, it is best to be wary of relying on the supposed validation that comes with institutional investors. They too, get it wrong sometimes. If multiple institutions change their view on a stock at the same time, you could see the share price drop fast. It's therefore worth looking at L.B. Foster's earnings history below. Of course, the future is what really matters.
Investors should note that institutions actually own more than half the company, so they can collectively wield significant power. It looks like hedge funds own 6.0% of L.B. Foster shares. That catches my attention because hedge funds sometimes try to influence management, or bring about changes that will create near term value for shareholders. Dimensional Fund Advisors L.P. is currently the company's largest shareholder with 6.2% of shares outstanding. With 6.0% and 4.8% of the shares outstanding respectively, Renaissance Technologies Corp. and GAMCO Investors, Inc. are the second and third largest shareholders. In addition, we found that Robert Bauer, the CEO has 1.5% of the shares allocated to their name.
A closer look at our ownership figures suggests that the top 19 shareholders have a combined ownership of 50% implying that no single shareholder has a majority.
While studying institutional ownership for a company can add value to your research, it is also a good practice to research analyst recommendations to get a deeper understand of a stock's expected performance. There is a little analyst coverage of the stock, but not much. So there is room for it to gain more coverage.
Insider Ownership Of L.B. Foster
The definition of an insider can differ slightly between different countries, but members of the board of directors always count. 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.
We can see that insiders own shares in L.B. Foster Company. It has a market capitalization of just US$186m, and insiders have US$15m worth of shares, in their own names. Some would say this shows alignment of interests between shareholders and the board, though I generally prefer to see bigger insider holdings. But it might be worth checking if those insiders have been selling.
General Public Ownership
The general public, with a 29% stake in the company, will not easily be ignored. 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.
While it is well worth considering the different groups that own a company, there are other factors that are even more important. For example, we've discovered 2 warning signs for L.B. Foster (1 can't be ignored!) that you should be aware of before investing here.
Ultimately the future is most important. You can access this free report on analyst forecasts for the company.
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.
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. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
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