Key Insights

• Shanxi Huhua Group's significant insider ownership suggests inherent interests in company's expansion
• The top 2 shareholders own 57% of the company
• Past performance of a company along with ownership data serve to give a strong idea about prospects for a business

Every investor in Shanxi Huhua Group Co., Ltd. (SZSE:003002) should be aware of the most powerful shareholder groups. The group holding the most number of shares in the company, around 35% to be precise, is individual insiders. Put another way, the group faces the maximum upside potential (or downside risk).

And following last week's 9.5% decline in share price, insiders suffered the most losses.

In the chart below, we zoom in on the different ownership groups of Shanxi Huhua Group.

See our latest analysis for Shanxi Huhua Group

What Does The Institutional Ownership Tell Us About Shanxi Huhua Group?

Many institutions measure their performance against an index that approximates the local market. So they usually pay more attention to companies that are included in major indices.

As you can see, institutional investors have a fair amount of stake in Shanxi Huhua Group. This suggests some credibility amongst professional investors. But we can't rely on that fact alone since institutions make bad investments sometimes, just like everyone does. 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 Shanxi Huhua Group's historic earnings and revenue below, but keep in mind there's always more to the story.

We note that hedge funds don't have a meaningful investment in Shanxi Huhua Group. Yuezhong Qin is currently the largest shareholder, with 31% of shares outstanding. With 27% and 2.0% of the shares outstanding respectively, Changzhi Fangyuan Investment Co., Ltd. and Shanghai Xuanding Asset Management Co., Ltd. are the second and third largest shareholders.

A more detailed study of the shareholder registry showed us that 2 of the top shareholders have a considerable amount of ownership in the company, via their 57% stake.

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 Shanxi Huhua Group

While the precise definition of an insider can be subjective, almost everyone considers board members to be insiders. Company management run the business, but the CEO will answer to the board, even if he or she is a member of it.

I generally consider insider ownership to be a good thing. However, on some occasions it makes it more difficult for other shareholders to hold the board accountable for decisions.

Our most recent data indicates that insiders own a reasonable proportion of Shanxi Huhua Group Co., Ltd.. Insiders have a CN¥1.2b stake in this CN¥3.5b business. We would say this shows alignment with shareholders, but it is worth noting that the company is still quite small; some insiders may have founded the business. You can click here to see if those insiders have been buying or selling.

General Public Ownership

With a 31% ownership, the general public, mostly comprising of individual investors, have some degree of sway over Shanxi Huhua Group. While this group can't necessarily call the shots, it can certainly have a real influence on how the company is run.

Private Company Ownership

We can see that Private Companies own 28%, of the shares on issue. Private companies may be related parties. Sometimes insiders have an interest in a public company through a holding in a private company, rather than in their own capacity as an individual. While it's hard to draw any broad stroke conclusions, it is worth noting as an area for further research.

Next Steps:

While it is well worth considering the different groups that own a company, there are other factors that are even more important. Take risks for example - Shanxi Huhua Group has 1 warning sign we think you should be aware of.

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.