Key Insights

• Hangzhou First Applied Material's significant private companies ownership suggests that the key decisions are influenced by shareholders from the larger public
• The top 2 shareholders own 62% of the company
• 13% of Hangzhou First Applied Material is held by insiders

Every investor in Hangzhou First Applied Material Co., Ltd. (SHSE:603806) should be aware of the most powerful shareholder groups. With 50% stake, private companies possess the maximum shares in the company. In other words, the group stands to gain the most (or lose the most) from their investment into the company.

As market cap fell to CN¥41b last week, private companies would have faced the highest losses than any other shareholder groups of the company.

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

What Does The Institutional Ownership Tell Us About Hangzhou First Applied Material?

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.

We can see that Hangzhou First Applied Material does have institutional investors; and they hold a good portion of the company's stock. This can indicate that the company has a certain degree of credibility in the investment community. However, it is best to be wary of relying on the supposed validation that comes with institutional investors. They too, get it wrong sometimes. 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 Hangzhou First Applied Material, (below). Of course, keep in mind that there are other factors to consider, too.

Hedge funds don't have many shares in Hangzhou First Applied Material. The company's largest shareholder is Hangzhou First Technology Group Co., Ltd., with ownership of 49%. With 13% and 1.4% of the shares outstanding respectively, Jianhua Lin and JP Morgan Asset Management are the second and third largest shareholders. Jianhua Lin, who is the second-largest shareholder, also happens to hold the title of President.

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. Quite a few analysts cover the stock, so you could look into forecast growth quite easily.

Insider Ownership Of Hangzhou First Applied Material

While the precise definition of an insider can be subjective, almost everyone considers board members to be insiders. Management ultimately answers to the board. However, it is not uncommon for managers to be executive board members, especially if they are a founder or the CEO.

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 information suggests that insiders maintain a significant holding in Hangzhou First Applied Material Co., Ltd.. Insiders own CN¥5.5b worth of shares in the CN¥41b company. That's quite meaningful. Most would say this shows a good degree of alignment with shareholders, especially in a company of this size. You can click here to see if those insiders 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 Hangzhou First Applied Material. 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

It seems that Private Companies own 50%, of the Hangzhou First Applied Material stock. It's hard to draw any conclusions from this fact alone, so its worth looking into who owns those private companies. Sometimes insiders or other related parties have an interest in shares in a public company through a separate private company.

Next Steps:

While it is well worth considering the different groups that own a company, there are other factors that are even more important. Consider for instance, the ever-present spectre of investment risk. We've identified 1 warning sign with Hangzhou First Applied Material , and understanding them should be part of your investment process.

If you are like me, you may want to think about whether this company will grow or shrink. Luckily, you can check this free report showing analyst forecasts for its 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.