Key Insights

• Guangdong Fangyuan New Materials Group's significant retail investors ownership suggests that the key decisions are influenced by shareholders from the larger public
• 50% of the business is held by the top 11 shareholders
• 23% of Guangdong Fangyuan New Materials Group is held by insiders

Every investor in Guangdong Fangyuan New Materials Group Co., Ltd. (SHSE:688148) should be aware of the most powerful shareholder groups. And the group that holds the biggest piece of the pie are retail investors with 38% ownership. That is, the group stands to benefit the most if the stock rises (or lose the most if there is a downturn).

While the holdings of retail investors took a hit after last week's 18% price drop, insiders with their 23% also suffered.

In the chart below, we zoom in on the different ownership groups of Guangdong Fangyuan New Materials Group.

What Does The Institutional Ownership Tell Us About Guangdong Fangyuan New Materials Group?

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.

As you can see, institutional investors have a fair amount of stake in Guangdong Fangyuan New Materials Group. 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 Guangdong Fangyuan New Materials Group's historic earnings and revenue below, but keep in mind there's always more to the story.

Hedge funds don't have many shares in Guangdong Fangyuan New Materials Group. The company's CEO Aiping Luo is the largest shareholder with 15% of shares outstanding. For context, the second largest shareholder holds about 8.5% of the shares outstanding, followed by an ownership of 5.1% by the third-largest shareholder.

After doing some more digging, we found that the top 11 have the combined ownership of 50% in the company, suggesting that no single shareholder has significant control over the company.

While it makes sense to study institutional ownership data for a company, it also makes sense to study analyst sentiments to know which way the wind is blowing. Our information suggests that there isn't any analyst coverage of the stock, so it is probably little known.

Insider Ownership Of Guangdong Fangyuan New Materials Group

The definition of an insider can differ slightly between different countries, but members of the board of directors always count. 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 information suggests that insiders maintain a significant holding in Guangdong Fangyuan New Materials Group Co., Ltd.. Insiders own CN¥490m worth of shares in the CN¥2.1b company. It is great to see insiders so invested in the business. It might be worth checking if those insiders have been buying recently.

General Public Ownership

The general public-- including retail investors -- own 38% 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 a stake of 14%, private equity firms could influence the Guangdong Fangyuan New Materials Group board. Some might like this, because private equity are sometimes activists who hold management accountable. But other times, private equity is selling out, having taking the company public.

Public Company Ownership

We can see that public companies hold 5.1% of the Guangdong Fangyuan New Materials Group shares on issue. This may be a strategic interest and the two companies may have related business interests. It could be that they have de-merged. This holding is probably worth investigating further.

Next Steps:

It's always worth thinking about the different groups who own shares in a company. But to understand Guangdong Fangyuan New Materials Group better, we need to consider many other factors. Case in point: We've spotted 3 warning signs for Guangdong Fangyuan New Materials Group you should be aware of, and 2 of them are a bit concerning.

If you would prefer check out another company -- one with potentially superior financials -- then do not miss this free list of interesting companies, backed by strong financial data.

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.

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