Industry NewsA look at the shareholders of Menon Bearings Limited (NSE:MENONBE) can tell us which group is most powerful. Insiders often own a large chunk of younger, smaller, companies while huge companies tend to have institutions as shareholders. 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.
Menon Bearings is a smaller company with a market capitalization of ?4.0b, so it may still be flying under the radar of many institutional investors. Our analysis of the ownership of the company, below, shows that institutional investors have not yet purchased much of the company. Let’s take a closer look to see what the different types of shareholder can tell us about MENONBE.
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.
Less than 5% of Menon Bearings is held by institutional investors. This suggests that some funds have the company in their sights, but many have not yet bought shares in it. If the business gets stronger from here, we could see a situation where more institutions are keen to buy. It is not uncommon to see a big share price rise if multiple institutional investors are trying to buy into a stock at the same time. So check out the historic earnings trajectory, below, but keep in mind it’s the future that counts most.
Hedge funds don’t have many shares in Menon Bearings. As far I can tell there isn’t analyst coverage of the company, so it is probably flying under the radar.
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.
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.
It seems insiders own a significant proportion of Menon Bearings Limited. Insiders have a ?1.9b stake in this ?4.0b business. This may suggest that the founders still own a lot of shares. You can click here to see if they have been buying or selling.
The general public holds a 25% stake in MENONBE. 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.
We can see that Private Companies own 24%, of the shares on issue. Private companies may be related parties. Sometimes insiders have an interest in a public company through a holding in a private company, rather than in their own capacity as an individual. While it’s hard to draw any broad stroke conclusions, it is worth noting as an area for further research.
