Key Insights

• The considerable ownership by private companies in Xiamen Faratronic indicates that they collectively have a greater say in management and business strategy
• A total of 4 investors have a majority stake in the company with 54% ownership
• Institutional ownership in Xiamen Faratronic is 31%

Every investor in Xiamen Faratronic Co., Ltd. (SHSE:600563) should be aware of the most powerful shareholder groups. We can see that private companies own the lion's share in the company with 43% ownership. Put another way, the group faces the maximum upside potential (or downside risk).

Institutions, on the other hand, account for 31% of the company's stockholders. Large companies usually have institutions as shareholders, and we usually see insiders owning shares in smaller companies.

In the chart below, we zoom in on the different ownership groups of Xiamen Faratronic.

What Does The Institutional Ownership Tell Us About Xiamen Faratronic?

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.

Xiamen Faratronic 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. 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 Xiamen Faratronic's historic earnings and revenue below, but keep in mind there's always more to the story.

Xiamen Faratronic is not owned by hedge funds. Looking at our data, we can see that the largest shareholder is Xiamen Farah development Corp with 37% of shares outstanding. For context, the second largest shareholder holds about 6.6% of the shares outstanding, followed by an ownership of 5.3% by the third-largest shareholder.

On looking further, we found that 54% of the shares are owned by the top 4 shareholders. In other words, these shareholders have a meaningful say in the decisions of the company.

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 are a reasonable number of analysts covering the stock, so it might be useful to find out their aggregate view on the future.

Insider Ownership Of Xiamen Faratronic

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.

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 data suggests that insiders own under 1% of Xiamen Faratronic Co., Ltd. in their own names. However, it's possible that insiders might have an indirect interest through a more complex structure. It's a big company, so even a small proportional interest can create alignment between the board and shareholders. In this case insiders own CN¥91k worth of shares. Arguably, recent buying and selling is just as important to consider. You can click here to see if insiders have been buying or selling.

General Public Ownership

The general public, who are usually individual investors, hold a 26% stake in Xiamen Faratronic. 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

We can see that Private Companies own 43%, 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 Xiamen Faratronic better, we need to consider many other factors.

Many find it useful to take an in depth look at how a company has performed in the past. You can access this detailed graph of past earnings, revenue and cash flow.

If you would prefer discover what analysts are predicting in terms of future growth, do not miss this free report on analyst forecasts.

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