Key Insights

• Changqing Machinery's significant insider ownership suggests inherent interests in company's expansion
• A total of 3 investors have a majority stake in the company with 55% ownership
• 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 Changqing Machinery Company Limited (SHSE:603768), it is important to understand the ownership structure of the business. We can see that individual insiders own the lion's share in the company with 61% 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 12% gain.

In the chart below, we zoom in on the different ownership groups of Changqing Machinery.

What Does The Institutional Ownership Tell Us About Changqing Machinery?

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 Changqing Machinery does have institutional investors; and they hold a good portion of the company's stock. 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. 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 Changqing Machinery, (below). Of course, keep in mind that there are other factors to consider, too.

We note that hedge funds don't have a meaningful investment in Changqing Machinery. The company's CEO Yinghong Wu is the largest shareholder with 29% of shares outstanding. Meanwhile, the second and third largest shareholders, hold 16% and 10.0%, of the shares outstanding, respectively. Interestingly, the third-largest shareholder, Huijuan Zhu is also a Member of the Board of Directors, again, indicating strong insider ownership amongst the company's top shareholders.

After doing some more digging, we found that the top 3 shareholders collectively control more than half of the company's shares, implying that they have considerable power to influence the company's decisions.

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. As far as we can tell there isn't analyst coverage of the company, so it is probably flying under the radar.

Insider Ownership Of Changqing Machinery

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.

Insider ownership is positive when it signals leadership are thinking like the true owners of the company. However, high insider ownership can also give immense power to a small group within the company. This can be negative in some circumstances.

It seems that insiders own more than half the Changqing Machinery Company Limited stock. This gives them a lot of power. That means they own CN¥2.2b worth of shares in the CN¥3.6b company. That's quite meaningful. It is good to see this level of investment. You can check here to see if those insiders have been buying recently.

General Public Ownership

The general public-- including retail investors -- own 32% 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.

Next Steps:

It's always worth thinking about the different groups who own shares in a company. But to understand Changqing Machinery better, we need to consider many other factors. Consider for instance, the ever-present spectre of investment risk. We've identified 4 warning signs with Changqing Machinery (at least 1 which is significant) , and understanding them should be part of your investment process.

Of course this may not be the best stock to buy. So take a peek at this free free list of interesting companies.

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.