Key Insights

• Henan Liliang Diamond's significant insider ownership suggests inherent interests in company's expansion
• The top 3 shareholders own 51% of the company
• 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 Henan Liliang Diamond Co., Ltd. (SZSE:301071), 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 49% 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 scored the highest last week as the company hit CN¥9.6b market cap following a 26% gain in the stock.

In the chart below, we zoom in on the different ownership groups of Henan Liliang Diamond.

What Does The Institutional Ownership Tell Us About Henan Liliang Diamond?

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 Henan Liliang Diamond. 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. 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 Henan Liliang Diamond, (below). Of course, keep in mind that there are other factors to consider, too.

Henan Liliang Diamond is not owned by hedge funds. Zengming Shao is currently the largest shareholder, with 34% of shares outstanding. Meanwhile, the second and third largest shareholders, hold 14% and 2.5%, of the shares outstanding, respectively.

A more detailed study of the shareholder registry showed us that 3 of the top shareholders have a considerable amount of ownership in the company, via their 51% stake.

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 some analyst coverage of the stock, but it could still become more well known, with time.

Insider Ownership Of Henan Liliang Diamond

While the precise definition of an insider can be subjective, almost everyone considers board members to be insiders. 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 Henan Liliang Diamond Co., Ltd.. It has a market capitalization of just CN¥9.6b, and insiders have CN¥4.6b worth of shares in their own names. That's quite significant. Most would say this shows a good degree of alignment with shareholders, especially in a company of this size. You can click here to see if those insiders have been buying or selling.

General Public Ownership

With a 40% ownership, the general public, mostly comprising of individual investors, have some degree of sway over Henan Liliang Diamond. 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 4.3%, 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 Henan Liliang Diamond better, we need to consider many other factors. Consider for instance, the ever-present spectre of investment risk. We've identified 2 warning signs with Henan Liliang Diamond , and understanding them should be part of your investment process.

Ultimately the future is most important. You can access this free report on analyst forecasts for the company.

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.