Key Insights

• The considerable ownership by individual investors in China Shengmu Organic Milk indicates that they collectively have a greater say in management and business strategy
• The top 3 shareholders own 52% of the company
• 20% of China Shengmu Organic Milk is held by insiders

A look at the shareholders of China Shengmu Organic Milk Limited (HKG:1432) can tell us which group is most powerful. And the group that holds the biggest piece of the pie are individual investors with 33% ownership. That is, the group stands to benefit the most if the stock rises (or lose the most if there is a downturn).

As a result, individual investors were the biggest beneficiaries of last week's 20% gain.

Let's delve deeper into each type of owner of China Shengmu Organic Milk, beginning with the chart below.

View 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.

We can see that China Shengmu Organic Milk does have institutional investors; and they hold a good portion of the company's stock. 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. 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. Looking at our data, we can see that the largest shareholder is China Mengniu Dairy Company Limited with 30% of shares outstanding. With 16% and 6.5% 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 1.7% 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.

Researching institutional ownership is a good way to gauge and filter a stock's expected performance. The same can be achieved by studying analyst sentiments. As far as we can tell there isn't analyst coverage of the company, so it is probably flying under the radar.

Insider Ownership Of China Shengmu Organic Milk

While the precise definition of an insider can be subjective, almost everyone considers board members to be insiders. The company management answer to the board and the latter should represent the interests of shareholders. Notably, sometimes top-level managers are on the board themselves.

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.

Our most recent data indicates that insiders own a reasonable proportion of China Shengmu Organic Milk Limited. It has a market capitalization of just HK$2.8b, and insiders have HK$562m worth of shares in their own names. 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

The general public-- including retail investors -- own 33% stake in the company, and hence can't easily be ignored. While this size of ownership may not be enough to sway a policy decision in their favour, they can still make a collective impact on company policies.

Private Company Ownership

It seems that Private Companies own 6.5%, of the China Shengmu Organic Milk stock. It's hard to draw any conclusions from this fact alone, so its worth looking into who owns those private companies. Sometimes insiders or other related parties have an interest in shares in a public company through a separate private company.

Public Company Ownership

It appears to us that public companies own 30% of China Shengmu Organic Milk. 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:

It's always worth thinking about the different groups who own shares in a company. But to understand China Shengmu Organic Milk better, we need to consider many other factors. Take risks for example - China Shengmu Organic Milk has 3 warning signs 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.