Do Insiders Own Lots Of Shares In Fortunet e-Commerce Group Limited (HKG:1039)?

Every investor in Fortunet e-Commerce Group Limited (HKG:1039) should be aware of the most powerful shareholder groups. 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.

Fortunet e-Commerce Group is not a large company by global standards. It has a market capitalization of HK$887m, which means it wouldn’t have the attention of many institutional investors. Taking a look at our data on the ownership groups (below), it’s seems that institutions own shares in the company. We can zoom in on the different ownership groups, to learn more about Fortunet e-Commerce Group.

Check out our latest analysis for Fortunet e-Commerce Group

SEHK:1039 Ownership Summary, March 9th 2020
SEHK:1039 Ownership Summary, March 9th 2020

What Does The Institutional Ownership Tell Us About Fortunet e-Commerce Group?

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 Fortunet e-Commerce Group does have institutional investors; and they hold 8.8% of the stock. 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. 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 Fortunet e-Commerce Group’s historic earnings and revenue, below, but keep in mind there’s always more to the story.

SEHK:1039 Income Statement, March 9th 2020
SEHK:1039 Income Statement, March 9th 2020

Hedge funds don’t have many shares in Fortunet e-Commerce Group. Tang Pun is currently the company’s largest shareholder with 33% of shares outstanding. The second largest shareholder with 12%, is Starr International Company, Inc., followed by Beijing Enterprises Group Real-Estate Co., Ltd, with an ownership of 8.4%.

Further, we found that the top 3 shareholders have a combined ownership of 54% in the company, meaning that they are powerful enough to influence the decisions of the company.

Researching institutional ownership is a good way to gauge and filter a stock’s expected performance. The same can be achieved by studying analyst sentiments. We’re not picking up on any analyst coverage of the stock at the moment, so the company is unlikely to be widely held.

Insider Ownership Of Fortunet e-Commerce Group

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.

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 most recent data indicates that insiders own a reasonable proportion of Fortunet e-Commerce Group Limited. Insiders have a HK$366m stake in this HK$887m business. I 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 holds a 27% stake in 1039. While this size of ownership may not be enough to sway a policy decision in their favour, they can still make a collective impact on company policies.

Private Company Ownership

It seems that Private Companies own 21%, of the 1039 stock. Private companies may be related parties. Sometimes insiders have an interest in a public company through a holding in a private company, rather than in their own capacity as an individual. While it’s hard to draw any broad stroke conclusions, it is worth noting as an area for further research.

Next Steps:

I find it very interesting to look at who exactly owns a company. But to truly gain insight, we need to consider other information, too. Be aware that Fortunet e-Commerce Group is showing 3 warning signs in our investment analysis , and 1 of those doesn’t sit too well with us…

Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this 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.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. 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. Simply Wall St has no position in the stocks mentioned.

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