Key Insights

• Insiders appear to have a vested interest in Hubei Hongyuan Pharmaceutical Technology's growth, as seen by their sizeable ownership
• 52% of the business is held by the top 3 shareholders
• Using data from company's past performance alongside ownership research, one can better assess the future performance of a company

Every investor in Hubei Hongyuan Pharmaceutical Technology Co., Ltd. (SZSE:301246) should be aware of the most powerful shareholder groups. We can see that individual insiders own the lion's share in the company with 60% ownership. Put another way, the group faces the maximum upside potential (or downside risk).

And last week, insiders endured the biggest losses as the stock fell by 8.7%.

Let's take a closer look to see what the different types of shareholders can tell us about Hubei Hongyuan Pharmaceutical Technology.

What Does The Institutional Ownership Tell Us About Hubei Hongyuan Pharmaceutical Technology?

Many institutions measure their performance against an index that approximates the local market. So they usually pay more attention to companies that are included in major indices.

As you can see, institutional investors have a fair amount of stake in Hubei Hongyuan Pharmaceutical Technology. 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 Hubei Hongyuan Pharmaceutical Technology's earnings history below. Of course, the future is what really matters.

We note that hedge funds don't have a meaningful investment in Hubei Hongyuan Pharmaceutical Technology. Guoping Yin is currently the company's largest shareholder with 23% of shares outstanding. In comparison, the second and third largest shareholders hold about 22% and 6.6% of the stock. Shuangxi Xu, 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 3 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 Hubei Hongyuan Pharmaceutical Technology

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.

Most consider insider ownership a positive because it can indicate the board is well aligned with other shareholders. However, on some occasions too much power is concentrated within this group.

It seems that insiders own more than half the Hubei Hongyuan Pharmaceutical Technology Co., Ltd. stock. This gives them a lot of power. Given it has a market cap of CN¥5.1b, that means they have CN¥3.1b worth of shares. 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

With a 31% ownership, the general public, mostly comprising of individual investors, have some degree of sway over Hubei Hongyuan Pharmaceutical Technology. 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.

Next Steps:

While it is well worth considering the different groups that own a company, there are other factors that are even more important. Be aware that Hubei Hongyuan Pharmaceutical Technology is showing 3 warning signs in our investment analysis , and 1 of those doesn't sit too well with us...

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.

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.