Key Insights

• Huizhong Instrumentation's significant insider ownership suggests inherent interests in company's expansion
• The top 2 shareholders own 50% of the company
• Past performance of a company along with ownership data serve to give a strong idea about prospects for a business

Every investor in Huizhong Instrumentation Co., Ltd. (SZSE:300371) should be aware of the most powerful shareholder groups. The group holding the most number of shares in the company, around 64% to be precise, is individual insiders. 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 scored the highest last week as the company hit CN¥1.9b market cap following a 24% gain in the stock.

In the chart below, we zoom in on the different ownership groups of Huizhong Instrumentation.

What Does The Institutional Ownership Tell Us About Huizhong Instrumentation?

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.

Huizhong Instrumentation 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 Huizhong Instrumentation'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 Huizhong Instrumentation. Lixin Zhang is currently the largest shareholder, with 41% of shares outstanding. With 9.3% and 2.8% of the shares outstanding respectively, Yongcun Wang and Jianguo Dong are the second and third largest shareholders. Jianguo Dong, who is the third-largest shareholder, also happens to hold the title of Member of the Board of Directors.

To make our study more interesting, we found that the top 2 shareholders have a majority ownership in the company, meaning that they are powerful enough to influence 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. Our information suggests that there isn't any analyst coverage of the stock, so it is probably little known.

Insider Ownership Of Huizhong Instrumentation

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 most recent data indicates that insiders own the majority of Huizhong Instrumentation Co., Ltd.. This means they can collectively make decisions for the company. Given it has a market cap of CN¥1.9b, that means they have CN¥1.2b worth of shares. 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 30% stake in Huizhong Instrumentation. 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.

Next Steps:

While it is well worth considering the different groups that own a company, there are other factors that are even more important. Take risks for example - Huizhong Instrumentation has 2 warning signs we think you should be aware of.

Of course this may not be the best stock to buy. Therefore, you may wish to see our free collection of interesting prospects boasting favorable financials.

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.