Key Insights

• Insiders appear to have a vested interest in Jiangsu Huachen Transformer's growth, as seen by their sizeable ownership
• The largest shareholder of the company is Xiaojin Zhang with a 70% stake
• Ownership research, combined with past performance data can help provide a good understanding of opportunities in a stock

To get a sense of who is truly in control of Jiangsu Huachen Transformer Co., Ltd. (SHSE:603097), it is important to understand the ownership structure of the business. And the group that holds the biggest piece of the pie are individual insiders with 70% ownership. 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 were the biggest beneficiaries of last week's 18% gain.

In the chart below, we zoom in on the different ownership groups of Jiangsu Huachen Transformer.

What Does The Institutional Ownership Tell Us About Jiangsu Huachen Transformer?

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.

We can see that Jiangsu Huachen Transformer 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. 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 Jiangsu Huachen Transformer's historic earnings and revenue below, but keep in mind there's always more to the story.

Jiangsu Huachen Transformer is not owned by hedge funds. With a 70% stake, CEO Xiaojin Zhang is the largest shareholder. This essentially means that they have significant control over the outcome or future of the company, which is why insider ownership is usually looked upon favourably by prospective buyers. In comparison, the second and third largest shareholders hold about 2.5% and 2.5% of the stock.

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. 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 Jiangsu Huachen Transformer

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.

It seems that insiders own more than half the Jiangsu Huachen Transformer Co., Ltd. stock. This gives them a lot of power. So they have a CN¥2.6b stake in this CN¥3.7b business. 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

The general public, who are usually individual investors, hold a 20% stake in Jiangsu Huachen Transformer. 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

Our data indicates that Private Companies hold 5.0%, of the company's shares. 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 Jiangsu Huachen Transformer better, we need to consider many other factors. Take risks for example - Jiangsu Huachen Transformer has 3 warning signs (and 2 which make us uncomfortable) we think you should know about.

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.