I’ve been keeping a close eye on what substantial shareholders have been doing recently.
Substantial shareholders are shareholders that hold 5% or more of a company’s shares. These tend to be large investors, asset managers, and investment funds. These shareholders are obliged to update the market when they make any changes to their holdings.
As a result, I feel investors should look to use these notices to their advantage. After all, they show where the “smart money” is going.
Two notices that have caught my eye are summarised below:
FlexiGroup Limited (ASX: FXL)
A notice of initial substantial holder reveals that Renaissance Smaller Companies has been buying this financial services company’s shares. It became a substantial holder after its holding reached 21,209,608 shares or 5.38% of its total shares outstanding.
Renaissance Smaller Companies is a privately-owned boutique fund manager which was established in 2003 by David Fleming and Glen Hoffman. It employs an active approach to investment management, adopting a bottom up, value-based philosophy. It seeks to exploit market inefficiencies that result in security prices deviating from an assessed valuation. This appears to indicate that Renaissance Smaller Companies believes FlexiGroup’s shares are undervalued at present.
Nitro Software Ltd (ASX: NTO)
A notice reveals that Australian Ethical Investment Limited (ASX: AEF) has become a substantial holder of this document productivity software company this week. The ethical fund manager appears to have taken advantage of the weakness in Nitro Software’s shares since their IPO late last year to build a position.
Australian Ethical Investment now owns 9,525,819 shares, which equates to 5.04% of its total shares outstanding. The Nitro Software share price was last changing hands at $1.67, down from its IPO price of $1.72 per share. Australian Ethical Investment appears to see a lot of potential in the company’s Nitro Productivity Suite. This provides integrated PDF productivity and electronic signature tools to customers through a horizontal, software-as-a-service and desktop-based software solution.
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James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of Australian Ethical Investment Ltd. The Motley Fool Australia has recommended Australian Ethical Investment Ltd. and FlexiGroup Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.