Key Insights

• Significant insider control over Guangdong Hongxing Industrial implies vested interests in company growth
• 53% of the business is held by the top 2 shareholders
• Using data from company's past performance alongside ownership research, one can better assess the future performance of a company

Every investor in Guangdong Hongxing Industrial Co., Ltd. (SZSE:001209) should be aware of the most powerful shareholder groups. And the group that holds the biggest piece of the pie are individual insiders with 69% ownership. Put another way, the group faces the maximum upside potential (or downside risk).

As a result, insiders were the biggest beneficiaries of last week's 23% gain.

In the chart below, we zoom in on the different ownership groups of Guangdong Hongxing Industrial.

What Does The Institutional Ownership Tell Us About Guangdong Hongxing Industrial?

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.

Since institutions own only a small portion of Guangdong Hongxing Industrial, many may not have spent much time considering the stock. But it's clear that some have; and they liked it enough to buy in. If the business gets stronger from here, we could see a situation where more institutions are keen to buy. When multiple institutional investors want to buy shares, we often see a rising share price. The past revenue trajectory (shown below) can be an indication of future growth, but there are no guarantees.

Hedge funds don't have many shares in Guangdong Hongxing Industrial. Looking at our data, we can see that the largest shareholder is Xuanfeng Guo with 36% of shares outstanding. In comparison, the second and third largest shareholders hold about 17% and 13% of the stock. Interestingly, the bottom two of the top three shareholders also hold the title of Chief Executive Officer and Member of the Board of Directors, respectively, suggesting that these insiders have a personal stake in the company.

After doing some more digging, we found that the top 2 shareholders collectively control more than half of the company's shares, implying that they have considerable power to influence the company's decisions.

While studying institutional ownership for a company can add value to your research, it is also a good practice to research analyst recommendations to get a deeper understand of a stock's expected performance. We're not picking up on any analyst coverage of the stock at the moment, so the company is unlikely to be widely held.

Insider Ownership Of Guangdong Hongxing Industrial

The definition of company insiders can be subjective and does vary between jurisdictions. Our data reflects individual insiders, capturing board members at the very least. 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.

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.

It seems that insiders own more than half the Guangdong Hongxing Industrial Co., Ltd. stock. This gives them a lot of power. That means they own CN¥1.6b worth of shares in the CN¥2.3b company. That's quite meaningful. It is good to see this level of investment. You can check here to see if those insiders have been buying recently.

General Public Ownership

The general public, who are usually individual investors, hold a 22% stake in Guangdong Hongxing Industrial. 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 4.5%, of the Guangdong Hongxing Industrial stock. 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:

I find it very interesting to look at who exactly owns a company. But to truly gain insight, we need to consider other information, too. For example, we've discovered 3 warning signs for Guangdong Hongxing Industrial (2 are a bit unpleasant!) that you should be aware of before investing here.

Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of interesting companies.

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.