Key Insights

• The considerable ownership by private companies in Chengzhi indicates that they collectively have a greater say in management and business strategy
• The top 3 shareholders own 53% of the company
• Ownership research, combined with past performance data can help provide a good understanding of opportunities in a stock

A look at the shareholders of Chengzhi Co., Ltd. (SZSE:000990) can tell us which group is most powerful. We can see that private companies own the lion's share in the company with 50% ownership. Put another way, the group faces the maximum upside potential (or downside risk).

And last week, private companies endured the biggest losses as the stock fell by 5.4%.

Let's take a closer look to see what the different types of shareholders can tell us about Chengzhi.

What Does The Institutional Ownership Tell Us About Chengzhi?

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 Chengzhi does have institutional investors; and they hold a good portion of the company's stock. 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. If multiple institutions change their view on a stock at the same time, you could see the share price drop fast. It's therefore worth looking at Chengzhi's earnings history below. Of course, the future is what really matters.

We note that hedge funds don't have a meaningful investment in Chengzhi. Our data shows that Chengzhi Kerong Holdings Co., Ltd. is the largest shareholder with 31% of shares outstanding. For context, the second largest shareholder holds about 16% of the shares outstanding, followed by an ownership of 6.8% by the third-largest shareholder.

A more detailed study of the shareholder registry showed us that 3 of the top shareholders have a considerable amount of ownership in the company, via their 53% 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. There is a little analyst coverage of the stock, but not much. So there is room for it to gain more coverage.

Insider Ownership Of Chengzhi

The definition of an insider can differ slightly between different countries, but members of the board of directors always count. 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 less than 1% of Chengzhi Co., Ltd.. However, it's possible that insiders might have an indirect interest through a more complex structure. Keep in mind that it's a big company, and the insiders own CN¥8.8k worth of shares. The absolute value might be more important than the proportional share. It is always good to see at least some insider ownership, but it might be worth checking if those insiders have been selling.

General Public Ownership

The general public-- including retail investors -- own 37% 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 Equity Ownership

With an ownership of 6.8%, private equity firms are in a position to play a role in shaping corporate strategy with a focus on value creation. Sometimes we see private equity stick around for the long term, but generally speaking they have a shorter investment horizon and -- as the name suggests -- don't invest in public companies much. After some time they may look to sell and redeploy capital elsewhere.

Private Company Ownership

Our data indicates that Private Companies hold 50%, of the company's shares. 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. To that end, you should be aware of the 1 warning sign we've spotted with Chengzhi .

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.

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