Could GOME Retail Holdings Limited’s (HKG:493) Investor Composition Influence The Stock Price?

A look at the shareholders of GOME Retail Holdings Limited (HKG:493) can tell us which group is most powerful. Institutions will often hold stock in bigger companies, and we expect to see insiders owning a noticeable percentage of the smaller ones. I generally like to see some degree of insider ownership, even if only a little. As Nassim Nicholas Taleb said, ‘Don’t tell me what you think, tell me what you have in your portfolio.

GOME Retail Holdings has a market capitalization of HK$27b, so it’s too big to fly under the radar. We’d expect to see both institutions and retail investors owning a portion of the company. In the chart below, we can see that institutions own shares in the company. Let’s take a closer look to see what the different types of shareholder can tell us about GOME Retail Holdings.

See our latest analysis for GOME Retail Holdings

SEHK:493 Ownership Summary June 22nd 2020
SEHK:493 Ownership Summary June 22nd 2020

What Does The Institutional Ownership Tell Us About GOME Retail Holdings?

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.

GOME Retail Holdings already has institutions on the share registry. Indeed, they own 15% of 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 GOME Retail Holdings’s historic earnings and revenue, below, but keep in mind there’s always more to the story.

SEHK:493 Income Statement June 22nd 2020
SEHK:493 Income Statement June 22nd 2020

GOME Retail Holdings is not owned by hedge funds. Looking at our data, we can see that the largest shareholder is Kwong Yu Wong with 53% of shares outstanding. This implies that they have majority interest control of the future of the company. Noah Holdings Limited, Asset Management Arm is the second largest shareholder with 7.4% of common stock, followed by BlackRock, Inc., holding 2.0% of the stock.

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. Quite a few analysts cover the stock, so you could look into forecast growth quite easily.

Insider Ownership Of GOME Retail Holdings

The definition of company insiders can be subjective, and does vary between jurisdictions. Our data reflects individual insiders, capturing board members at the very least. 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.

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.

Our information suggests that insiders own more than half of GOME Retail Holdings Limited. This gives them effective control of the company. That means insiders have a very meaningful HK$15b stake in this HK$27b business. It is good to see this level of investment. You can check here to see if those insiders have been selling any of their shares.

General Public Ownership

The general public, with a 31% stake in the company, will not easily be ignored. 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. To that end, you should be aware of the 2 warning signs we’ve spotted with GOME Retail Holdings .

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. 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. Thank you for reading.