Last November, 530,915 Australians became shareholders in Coles (COL), making it one of the most widely held stocks. While this number has now reduced a tad with shareholders exiting small parcels, it still has one of Australia’s most inverted registers with more than 90% of shareholders owning less than 5,000 shares and the top 0.2% of shareholders owning 60% of the shares on issue.

This is typical of newly demerged companies, but Coles isn’t your typical demerger. Normally, they are the unloved “problem division” that the parent company doesn’t know what to do with, starves of capital, and keeps under a pretty tight leash. This is one of the theories offered to explain why demerged companies have historically outperformed over the medium term. Think S32 from BHP, Orora from Amcor, Pendal from Westpac, BlueScope (eventually) from BHP, Dulux from Orica and Treasury Wine Estates from Fosters.

“Big isn’t always better” and a refreshed management team removed from the bureaucracy and constraints of “head office” is set free to thrive.

But Coles isn’t in this category. It has had access to almost 60% of Wesfarmers capital and been part of a conglomerate that operates with a culture of a thin head office and very autonomous business divisions.

To find out what the upsides and downsides are for Coles investors, plus Paul Rickard's call for the stock, click here to take a free 21-day trial to the Switzer Report.