Key Insights

• Significant insider control over Shandong Huifa FoodstuffLtd implies vested interests in company growth
• 57% of the business is held by the top 2 shareholders
• Past performance of a company along with ownership data serve to give a strong idea about prospects for a business

To get a sense of who is truly in control of Shandong Huifa Foodstuff Co.,Ltd. (SHSE:603536), it is important to understand the ownership structure of the business. The group holding the most number of shares in the company, around 35% to be precise, is individual insiders. Put another way, the group faces the maximum upside potential (or downside risk).

Clearly, insiders benefitted the most after the company's market cap rose by CN¥582m last week.

Let's take a closer look to see what the different types of shareholders can tell us about Shandong Huifa FoodstuffLtd.

What Does The Institutional Ownership Tell Us About Shandong Huifa FoodstuffLtd?

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.

We can see that Shandong Huifa FoodstuffLtd does have institutional investors; and they hold a good portion of the company's stock. This suggests some credibility amongst professional investors. But we can't rely on that fact alone since institutions make bad investments sometimes, just like everyone does. If multiple institutions change their view on a stock at the same time, you could see the share price drop fast. It's therefore worth looking at Shandong Huifa FoodstuffLtd's earnings history below. Of course, the future is what really matters.

Hedge funds don't have many shares in Shandong Huifa FoodstuffLtd. Shandong Huifa Investment Co., Ltd. is currently the company's largest shareholder with 29% of shares outstanding. Zeng Yu Hui is the second largest shareholder owning 28% of common stock, and Hong Yang holds about 4.2% of the company stock.

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.

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. 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 Shandong Huifa FoodstuffLtd

The definition of an insider can differ slightly between different countries, but members of the board of directors always count. Company management run the business, but the CEO will answer to the board, even if he or she is a member of it.

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 Shandong Huifa Foodstuff Co.,Ltd.. Insiders own CN¥968m worth of shares in the CN¥2.8b company. We would say this shows alignment with shareholders, but it is worth noting that the company is still quite small; some insiders may have founded the business. You can click here to see if those insiders have been buying or selling.

General Public Ownership

The general public, who are usually individual investors, hold a 28% stake in Shandong Huifa FoodstuffLtd. This size of ownership, while considerable, may not be enough to change company policy if the decision is not in sync with other large shareholders.

Private Company Ownership

We can see that Private Companies own 31%, of the shares on issue. 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 Shandong Huifa FoodstuffLtd better, we need to consider many other factors. For example, we've discovered 2 warning signs for Shandong Huifa FoodstuffLtd (1 makes us a bit uncomfortable!) that you should be aware of before investing here.

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.

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.