General Electric Company (NYSE:GE) and SeaDrill Limited (NYSE:SDRL), both of firms have diverse level of ownership. Using high/lower both types of ownership as circumstantial evidence in a value investing research process should be done carefully, as rather than offering help in finding value; it can sometimes give false signals and lead an investor astray.
For investors it’s vital to know about both type of ownership about firm, as institutional ownership is the percentage of a stock’s float owned by institutions such as mutual funds, pension funds and endowments. Float is the proportion of issued also outstanding shares that can be liberally traded, nothing like locked-up insider holdings or restricted employee shares. Institutional ownership is usually beneficial to a stock price initially, but very high institutional ownership has several shortcomings. Institutional ownership can eventually exceed 100 percent of float, which means that, in addition to all the available shares, institutions have also bought up all the borrowed shares from short sellers who are betting that the stock will decline.
While under theory that management are shareholders, many value investors look for stocks with a high percent of insider ownership, because they will act in its own self interest, as well create shareholder value in the long-term. This aligns the interests of shareholders with management, thus benefiting everyone.
General Electric Company (NYSE:GE)‘s institutional ownership stands at 55.90%. As higher figure of institutional mostly indicates intentions of capital gain, which is suitable for passive investors as well stocks with a large amount of institutional ownership are often looked upon favorably. Whereas, firm has insider ownership was declared as 0.05% and Insider transaction was recorded recently as -0.36%. The high insider ownership can as a matter of fact lead to the contradictory result, a management team that is unaccountable because they can keep their jobs under almost any circumstance. But in several cases high influential ownership could give a false signal to value investors, and can’t be reconciled with the original intent of the strategy.
GE reduced -0.48% to close at $27.08. The stock traded on unusually reduced volume of 30.77 Million comparing to the average volume of 36678.45 shares, completing picture of exact trends with uncompleted dots in volume over the norm. Beta factor, which is used to measure risk associated with the stock, was 1.22. Looking at volatility levels, the stock observed volatility of 1.09% in last week and saw volatility 1.45% over the past one month. Institutional transactions worth noted at -0.36%.
Institutional Investors own 30.60% of SeaDrill Limited (NYSE:SDRL) while inside ownership was 1.86%. The transaction change kept by insiders has seen a change of 0.01% in last six month period.
SDRL disclosed crashed down trend during the previous trading day. The firm declared -3.72% changes to end the trade at $0.36, with the overall traded capacity of 6.19 Million shares. Return on equity was booked as -2.00% while return on assets was -0.90%. This movement could be bad/good signal for few investors as firm is showing performance for the quarter as -77.36%.