Key Insights
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Given the large stake in the stock by institutions, Smith-Midland's stock price might be vulnerable to their trading decisions
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The top 4 shareholders own 53% of the company
A look at the shareholders of Smith-Midland Corporation ( NASDAQ:SMID ) can tell us which group is most powerful. The group holding the most number of shares in the company, around 35% to be precise, is hedge funds. That is, the group stands to benefit the most if the stock rises (or lose the most if there is a downturn).
Given the vast amount of money and research capacities at their disposal, hedge funds ownership tends to carry a lot of weight, especially with individual investors. Therefore, a good portion of institutional money invested in the company is usually a huge vote of confidence on its future.
In the chart below, we zoom in on the different ownership groups of Smith-Midland.
See our latest analysis for Smith-Midland
What Does The Institutional Ownership Tell Us About Smith-Midland?
Institutions typically measure themselves against a benchmark when reporting to their own investors, so they often become more enthusiastic about a stock once it's included in a major index. We would expect most companies to have some institutions on the register, especially if they are growing.
As you can see, institutional investors have a fair amount of stake in Smith-Midland. This suggests some credibility amongst professional investors. But we can't rely on that fact alone since institutions make bad investments sometimes, just like everyone does. When multiple institutions own a stock, there's always a risk that they are in a 'crowded trade'. When such a trade goes wrong, multiple parties may compete to sell stock fast. This risk is higher in a company without a history of growth. You can see Smith-Midland's historic earnings and revenue below, but keep in mind there's always more to the story.
It would appear that 35% of Smith-Midland shares are controlled by hedge funds. That worth noting, since hedge funds are often quite active investors, who may try to influence management. Many want to see value creation (and a higher share price) in the short term or medium term. Thompson Davis Asset Management is currently the company's largest shareholder with 35% of shares outstanding. Rodney Smith is the second largest shareholder owning 10% of common stock, and The Vanguard Group, Inc. holds about 4.2% of the company stock. Additionally, the company's CEO Ashley Smith directly holds 3.3% of the total shares outstanding.
Our research also brought to light the fact that roughly 53% of the company is controlled by the top 4 shareholders suggesting that these owners wield significant influence on the business.
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. We're not picking up on any analyst coverage of the stock at the moment, so the company is unlikely to be widely held.
Insider Ownership Of Smith-Midland
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.
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.
Our information suggests that insiders maintain a significant holding in Smith-Midland Corporation. It has a market capitalization of just US$199m, and insiders have US$28m worth of shares in their own names. It is great to see insiders so invested in the business. It might be worth checking if those insiders have been buying recently.
General Public Ownership
With a 28% ownership, the general public, mostly comprising of individual investors, have some degree of sway over Smith-Midland. 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 Smith-Midland better, we need to consider many other factors.
Many find it usefulto 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. Therefore, you may wish to see our free collection of interesting prospects boasting favorable financials.
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This article by Simply Wall St is general in nature.
We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice.
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.
