The big shareholder groups in China Shengmu Organic Milk Limited (HKG:1432) have power over the company. Institutions will often hold stock in bigger companies, and we expect to see insiders owning a noticeable percentage of the smaller ones. Warren Buffett said that he likes "a business with enduring competitive advantages that is run by able and owner-oriented people." So it's nice to see some insider ownership, because it may suggest that management is owner-oriented.

China Shengmu Organic Milk is not a large company by global standards. It has a market capitalization of HK$3.1b, which means it wouldn't have the attention of many institutional investors. In the chart below, we can see that institutional investors have bought into the company. Let's delve deeper into each type of owner, to discover more about China Shengmu Organic Milk.

See our latest analysis for China Shengmu Organic Milk

What Does The Institutional Ownership Tell Us About China Shengmu Organic Milk?

Institutional investors commonly compare their own returns to the returns of a commonly followed index. So they generally do consider buying larger companies that are included in the relevant benchmark index.

China Shengmu Organic Milk already has institutions on the share registry. Indeed, they own a respectable stake in the company. This implies the analysts working for those institutions have looked at the stock and they like it. But just like anyone else, they could be wrong. 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 China Shengmu Organic Milk's historic earnings and revenue below, but keep in mind there's always more to the story.

Hedge funds don't have many shares in China Shengmu Organic Milk. China Mengniu Dairy Company Limited is currently the company's largest shareholder with 30% of shares outstanding. With 16% and 6.4% of the shares outstanding respectively, Genhuo Shao and Greenbelt Global Limited are the second and third largest shareholders. Furthermore, CEO Jiawang Zhang is the owner of 1.6% of the company's shares.

After doing some more digging, we found that the top 3 shareholders collectively control more than half of the company's shares, implying that they have considerable power to influence the company's decisions.

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 China Shengmu Organic Milk

The definition of company insiders can be subjective and does vary between jurisdictions. Our data reflects individual insiders, capturing board members at the very least. Management ultimately answers to the board. However, it is not uncommon for managers to be executive board members, especially if they are a founder or the CEO.

Insider ownership is positive when it signals leadership are thinking like the true owners of the company. However, high insider ownership can also give immense power to a small group within the company. This can be negative in some circumstances.

It seems insiders own a significant proportion of China Shengmu Organic Milk Limited. Insiders own HK$629m worth of shares in the HK$3.1b company. This may suggest that the founders still own a lot of shares. You can click here to see if they have been buying or selling.

General Public Ownership

With a 34% ownership, the general public, mostly comprising of individual investors, have some degree of sway over China Shengmu Organic Milk. 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.

Private Company Ownership

Our data indicates that Private Companies hold 6.4%, of the company's shares. It might be worth looking deeper into this. If related parties, such as insiders, have an interest in one of these private companies, that should be disclosed in the annual report. Private companies may also have a strategic interest in the company.

Public Company Ownership

Public companies currently own 30% of China Shengmu Organic Milk stock. We can't be certain but it is quite possible this is a strategic stake. The businesses may be similar, or work together.

Next Steps:

While it is well worth considering the different groups that own a company, there are other factors that are even more important. Consider risks, for instance. Every company has them, and we've spotted 1 warning sign for China Shengmu Organic Milk you should know about.

If you would prefer check out another company -- one with potentially superior financials -- then do not miss this free list of interesting companies, backed by strong financial data.

NB: Figures in this article are calculated using data from the last twelve months, which refer to the 12-month period ending on the last date of the month the financial statement is dated. This may not be consistent with full year annual report figures.

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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.