Key Insights

• The considerable ownership by private companies in China Railway Materials indicates that they collectively have a greater say in management and business strategy
• The top 2 shareholders own 56% of the company
• Using data from company's past performance alongside ownership research, one can better assess the future performance of a company

Every investor in China Railway Materials Company Limited (SZSE:000927) should be aware of the most powerful shareholder groups. The group holding the most number of shares in the company, around 46% to be precise, is private companies. Put another way, the group faces the maximum upside potential (or downside risk).

Private equity firms, on the other hand, account for 26% of the company's stockholders.

Let's delve deeper into each type of owner of China Railway Materials, beginning with the chart below.

What Does The Institutional Ownership Tell Us About China Railway Materials?

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.

China Railway Materials 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. It is not uncommon to see a big share price drop if two large institutional investors try to sell out of a stock at the same time. So it is worth checking the past earnings trajectory of China Railway Materials, (below). Of course, keep in mind that there are other factors to consider, too.

Hedge funds don't have many shares in China Railway Materials. The company's largest shareholder is China Logistics Group Co., Ltd., with ownership of 38%. With 18% and 7.6% of the shares outstanding respectively, The Great Wall (Tianjin) Equity Investment Fund Management Co., Ltd. and Chengtong Fund 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 56% stake.

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 Railway Materials

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.

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.

Our information suggests that China Railway Materials Company Limited insiders own under 1% of the company. We do note, however, it is possible insiders have an indirect interest through a private company or other corporate structure. It is a pretty big company, so it would be possible for board members to own a meaningful interest in the company, without owning much of a proportional interest. In this case, they own around CN¥11k worth of shares (at current prices). It is good to see board members owning shares, but it might be worth checking if those insiders have been buying.

General Public Ownership

The general public, who are usually individual investors, hold a 20% stake in China Railway Materials. 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 Equity Ownership

With a stake of 26%, private equity firms could influence the China Railway Materials board. Some investors might be encouraged by this, since private equity are sometimes able to encourage strategies that help the market see the value in the company. Alternatively, those holders might be exiting the investment after taking it public.

Private Company Ownership

We can see that Private Companies own 46%, of the shares on issue. 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.

Next Steps:

It's always worth thinking about the different groups who own shares in a company. But to understand China Railway Materials better, we need to consider many other factors. Be aware that China Railway Materials is showing 1 warning sign in our investment analysis , 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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.
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.