Key Insights

• Insiders appear to have a vested interest in Hengerda New Materials (Fujian)'s growth, as seen by their sizeable ownership
• 66% of the company is held by a single shareholder (Zhenghua Lin)
• Past performance of a company along with ownership data serve to give a strong idea about prospects for a business

Every investor in Hengerda New Materials (Fujian) Co., Ltd. (SZSE:300946) should be aware of the most powerful shareholder groups. With 70% stake, individual insiders possess the maximum shares in the company. 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, insiders as a group endured the highest losses after market cap fell by CN¥392m.

In the chart below, we zoom in on the different ownership groups of Hengerda New Materials (Fujian).

What Does The Institutional Ownership Tell Us About Hengerda New Materials (Fujian)?

Institutions typically measure themselves against a benchmark when reporting to their own investors, so they often become more enthusiastic about a stock once it's included in a major index. We would expect most companies to have some institutions on the register, especially if they are growing.

Less than 5% of Hengerda New Materials (Fujian) is held by institutional investors. This suggests that some funds have the company in their sights, but many have not yet bought shares in it. If the company is growing earnings, that may indicate that it is just beginning to catch the attention of these deep-pocketed investors. We sometimes see a rising share price when a few big institutions want to buy a certain stock at the same time. The history of earnings and revenue, which you can see below, could be helpful in considering if more institutional investors will want the stock. Of course, there are plenty of other factors to consider, too.

We note that hedge funds don't have a meaningful investment in Hengerda New Materials (Fujian). With a 66% stake, CEO Zhenghua Lin is the largest shareholder. With such a huge stake, we infer that they have significant control of the future of the company. It's usually considered a good sign when insiders own a significant number of shares in the company, and in this case, we're glad to see a company insider with such skin in the game. For context, the second largest shareholder holds about 2.2% of the shares outstanding, followed by an ownership of 1.6% by the third-largest shareholder. Interestingly, the second-largest shareholder, Zhengxiong Lin is also Senior Key Executive, again, pointing towards strong insider ownership amongst the company's top shareholders.

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. While there is some analyst coverage, the company is probably not widely covered. So it could gain more attention, down the track.

Insider Ownership Of Hengerda New Materials (Fujian)

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 insiders own more than half of Hengerda New Materials (Fujian) Co., Ltd.. This gives them effective control of the company. Given it has a market cap of CN¥3.0b, that means they have CN¥2.1b worth of shares. Most would be pleased to see the board is investing alongside them. You may wish todiscover (for free) if they have been buying or selling.

General Public Ownership

With a 25% ownership, the general public, mostly comprising of individual investors, have some degree of sway over Hengerda New Materials (Fujian). 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.

Next Steps:

It's always worth thinking about the different groups who own shares in a company. But to understand Hengerda New Materials (Fujian) better, we need to consider many other factors. Like risks, for instance. Every company has them, and we've spotted 2 warning signs for Hengerda New Materials (Fujian) (of which 1 can't be ignored!) you should know about.

Ultimately the future is most important. You can access this free report on analyst forecasts for the company.

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.