The big shareholder groups in Hengan International Group Company Limited (HKG:1044) have power over the company. Insiders often own a large chunk of younger, smaller, companies while huge companies tend to have institutions as shareholders. 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.
With a market capitalization of HK$68b, Hengan International Group is rather large. We’d expect to see institutional investors on the register. Companies of this size are usually well known to retail investors, too. In the chart below, we can see that institutions are noticeable on the share registry. Let’s delve deeper into each type of owner, to discover more about Hengan International Group.
What Does The Institutional Ownership Tell Us About Hengan International Group?
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 Hengan International Group does have institutional investors; and they hold 30% of the stock. 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 Hengan International Group’s historic earnings and revenue, below, but keep in mind there’s always more to the story.
We note that hedge funds don’t have a meaningful investment in Hengan International Group. Looking at our data, we can see that the largest shareholder is the CEO Lin-Chit Hui with 21% of shares outstanding. Man Bok Sze is the second largest shareholder with 20% of common stock, followed by Capital Research and Management Company, holding 4.8% of the stock. Interestingly, Man Bok Sze is also a Top Key Executive, again, pointing towards strong insider ownership amongst the company’s top shareholders.
Additionally, we found that 51% of the shares are owned by the top 5 shareholders. In other words, these shareholders have a meaningful say in the decisions of the company.
While it makes sense to study institutional ownership data for a company, it also makes sense to study analyst sentiments to know which way the wind is blowing. There are a reasonable number of analysts covering the stock, so it might be useful to find out their aggregate view on the future.
Insider Ownership Of Hengan International Group
The definition of an insider can differ slightly between different countries, but members of the board of directors always count. Management ultimately answers to the board. However, it is not uncommon for managers to be executive board members, especially if they are a founder or the CEO.
Insider ownership is positive when it signals leadership are thinking like the true owners of the company. However, high insider ownership can also give immense power to a small group within the company. This can be negative in some circumstances.
Our information suggests that insiders maintain a significant holding in Hengan International Group Company Limited. It has a market capitalization of just HK$68b, and insiders have HK$29b worth of shares in their own names. That’s quite significant. Most would be pleased to see the board is investing alongside them. You may wish to access this free chart showing recent trading by insiders.
General Public Ownership
The general public, with a 25% 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.
While it is well worth considering the different groups that own a company, there are other factors that are even more important. Take risks, for example – Hengan International Group has 1 warning sign we think you should be aware of.
If you are like me, you may want to think about whether this company will grow or shrink. Luckily, you can check this free report showing analyst forecasts for its future.
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 email@example.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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