“Every investor in Emmis Communications Corp. should be aware of the most powerful shareholder groups,” notes Blake Harford, of Simply Wall St.
Insiders, he notes, often own a large chunk of younger, smaller, companies while huge companies tend to have institutions as shareholders.
“I generally like to see some degree of insider ownership, even if only a little,” Harford notes. “As Nassim Nicholas Taleb said, ‘Don’t tell me what you think, tell me what you have in your portfolio.’”
So, what’s Emmis’ story?
Emmis Communications is a smaller company, thanks to its many divestments seen over the years. It has a market capitalization of $67 million. As such, Harford says, it may still be flying under the radar of many institutional investors.
“Our analysis of the ownership of the company shows that institutional investors have bought into the company,” he notes.
Institutional investors commonly compare their own returns to the returns of a commonly followed index. So. Harford explains, they generally consider buying larger companies that are included in the relevant benchmark index.
“We can see that Emmis Communications does have institutional investors; and they hold 30.6% of the stock,” he says. “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. It is not uncommon to see a big share price drop if two large institutional investors try to sell out of a stock at the same time. So it is worth checking the past earnings trajectory of Emmis Communications. Of course, keep in mind that there are other factors to consider, too.
“It would appear that 8.5% of Emmis Communications shares are controlled by hedge funds,” Harford says. “That catches my attention because hedge funds sometimes try to influence management, or bring about changes that will create near term value for shareholders. As far I can tell there isn’t analyst coverage of the company, so it is probably flying under the radar.”
The general public holds a 47.9% stake in Emmis.
“While this size of ownership may not be enough to sway a policy decision in their favor, they can still make a collective impact on company policies,” Harford declares.
As of Monday’s last trade, Emmis stock is trading at $5.30, up 3.5% from Friday’s close. Shares, on average, are at their highest value in three years.
