Key Insights

• Institutions' substantial holdings in Jiangsu Hualan New Pharmaceutical MaterialLtd implies that they have significant influence over the company's share price
• A total of 5 investors have a majority stake in the company with 50% ownership
• Ownership research, combined with past performance data can help provide a good understanding of opportunities in a stock

To get a sense of who is truly in control of Jiangsu Hualan New Pharmaceutical Material Co.,Ltd. (SZSE:301093), it is important to understand the ownership structure of the business. The group holding the most number of shares in the company, around 42% to be precise, is institutions. Put another way, the group faces the maximum upside potential (or downside risk).

And institutional investors endured the highest losses after the company's share price fell by 5.9% last week. This set of investors may especially be concerned about the current loss, which adds to a one-year loss of 22% for shareholders. Institutions or "liquidity providers" control large sums of money and therefore, these types of investors usually have a lot of influence over stock price movements. Hence, if weakness in Jiangsu Hualan New Pharmaceutical MaterialLtd's share price continues, institutional investors may feel compelled to sell the stock, which might not be ideal for individual investors.

Let's delve deeper into each type of owner of Jiangsu Hualan New Pharmaceutical MaterialLtd, beginning with the chart below.

What Does The Institutional Ownership Tell Us About Jiangsu Hualan New Pharmaceutical MaterialLtd?

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 Jiangsu Hualan New Pharmaceutical MaterialLtd does have institutional investors; and they hold a good portion of the company's stock. 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 Jiangsu Hualan New Pharmaceutical MaterialLtd'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 Jiangsu Hualan New Pharmaceutical MaterialLtd. Looking at our data, we can see that the largest shareholder is Jiangyin Hualan Electromechanical Technology Co., Ltd. with 21% of shares outstanding. With 16% and 5.5% of the shares outstanding respectively, Huaxia Life Insurance Co. Ltd, Asset Management Arm and Yimin Hua are the second and third largest shareholders. Yimin Hua, who is the third-largest shareholder, also happens to hold the title of Chairman of the Board.

To make our study more interesting, we found that the top 5 shareholders control more than half of the company which implies that this group has considerable sway over the company's decision-making.

While it makes sense to study institutional ownership data for a company, it also makes sense to study analyst sentiments to know which way the wind is blowing. There is some analyst coverage of the stock, but it could still become more well known, with time.

Insider Ownership Of Jiangsu Hualan New Pharmaceutical MaterialLtd

The definition of an insider can differ slightly between different countries, but members of the board of directors always count. 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.

Most consider insider ownership a positive because it can indicate the board is well aligned with other shareholders. However, on some occasions too much power is concentrated within this group.

We can report that insiders do own shares in Jiangsu Hualan New Pharmaceutical Material Co.,Ltd.. It has a market capitalization of just CN¥3.3b, and insiders have CN¥211m worth of shares, in their own names. It is good to see some investment by insiders, but it might be worth checking if those insiders have been buying.

General Public Ownership

The general public-- including retail investors -- own 29% stake in the company, and hence can't easily be ignored. 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

It seems that Private Companies own 23%, of the Jiangsu Hualan New Pharmaceutical MaterialLtd 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.

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 for instance, the ever-present spectre of investment risk. We've identified 2 warning signs with Jiangsu Hualan New Pharmaceutical MaterialLtd , and understanding them should be part of your investment process.

But ultimately it is the future, not the past, that will determine how well the owners of this business will do. Therefore we think it advisable to take a look at this free report showing whether analysts are predicting a brighter future.

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.