This is what Graham Corporation’s (NYSE:GHM) shareholding structure looks like

Every Graham Corporation (NYSE: GHM) investor should know the most powerful shareholder groups. Institutions often own shares in larger companies, and we expect to see insiders owning a noticeable percentage of smaller ones. I like to see at least a little insider ownership. As Charlie Munger said “Show me the incentive and I’ll show you the result”.

Graham is a small company with a market capitalization of US$130 million, so it may still be flying under the radar of many institutional investors. Looking at our ownership group data (below), it appears that institutional investors have bought the company. Let’s dig deeper into each type of owner to learn more about Graham.

Check out our latest analysis for Graham

NYSE: Breakdown of GHM’s shareholding as of January 22, 2022

What does institutional ownership tell us about Graham?

Institutions typically measure themselves against a benchmark when reporting to their own investors, so they often become more enthusiastic about a stock once it is included in a major index. We would expect most companies to have some institutions listed, especially if they are growing.

We can see that Graham has institutional investors; and they own a good part of the shares of the company. This suggests some credibility with professional investors. But we cannot rely solely on this fact since institutions sometimes make bad investments, like everyone else. If multiple institutions change their minds on a stock at the same time, you could see the stock price drop quickly. So it’s worth checking out Graham’s earnings history below. Of course, the future is what really matters.

earnings-and-revenue-growth
NYSE: GHM Earnings and Revenue Growth January 22, 2022

Since institutional investors own more than half of the issued shares, the board will likely have to pay attention to their preferences. It would appear that 5.3% of Graham’s shares are controlled by hedge funds. This is worth noting, as hedge funds are often quite active investors, who may try to influence management. Many want value creation (and a rise in share price) in the short to medium term. Looking at our data, we can see that the largest shareholder is American Century Investment Management Inc. with 9.5% of shares outstanding. The second and third largest shareholders are ArrowMark Colorado Holdings, LLC and Royce & Associates, LP, with an equal number of shares to their name at 5.3%. Additionally, we found that Daniel Thoren, the CEO, owns 2.7% of the shares allocated to his name.

A closer look at our ownership figures suggests that the top 14 shareholders hold a combined ownership of 50%, implying that no single shareholder has a majority.

While studying the institutional ownership of a company can add value to your research, it is also recommended that you research analyst recommendations to better understand a stock’s expected performance. There are a reasonable number of analysts covering the stock, so it might be useful to know their overall view on the future.

Graham Insider Property

The definition of an insider may differ slightly from country to country, but board members still matter. The management of the company answers to the board of directors and the latter must represent the interests of the shareholders. In particular, sometimes the senior executives themselves sit on the board of directors.

Insider ownership is positive when it signals that executives think like the true owners of the company. However, strong insider ownership can also give immense power to a small group within the company. This can be negative in certain circumstances.

Our most recent data indicates that insiders hold shares of Graham Corporation. It has a market capitalization of just $130 million and insiders hold $9.9 million worth of shares, in their own name. Some would say this shows the alignment of interests between shareholders and the board, although we generally prefer to see larger insider participations. But it might be worth checking to see if these insiders have sold.

General public property

The general public, including retail investors, owns 25% of the company’s capital and therefore cannot be easily ignored. While this size of ownership may not be enough to sway a policy decision in their favor, they can still have a collective impact on company policies.

Next steps:

While it is worth considering the different groups that own a business, there are other, even more important factors. Example: we have identified 2 warning signs for Graham you should be aware.

If you prefer to find out what analysts are predicting in terms of future growth, don’t miss this free analyst forecast report.

NB: The figures in this article are calculated using trailing twelve month data, which refers to the 12 month period ending on the last day of the month in which the financial statements are dated. This may not be consistent with the annual report figures for the full year.

This Simply Wall St article is general in nature. We provide commentary based on historical data and analyst forecasts only using unbiased methodology and our articles are not intended to be financial advice. It is not a recommendation to buy or sell stocks and does not take into account your objectives or financial situation. Our goal is to bring you targeted long-term analysis based on fundamental data. Note that our analysis may not take into account the latest announcements from price-sensitive companies or qualitative materials. Simply Wall St has no position in the stocks mentioned.

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