What Kind Of Shareholders Own China Education Group Holdings Limited (HKG:839)?

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Every investor in China Education Group Holdings Limited (HKG:839) should be aware of the most powerful shareholder groups. 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.’

China Education Group Holdings is a pretty big company. It has a market capitalization of HK$24b. Normally institutions would own a significant portion of a company this size. In the chart below below, we can see that institutions are noticeable on the share registry. Let’s take a closer look to see what the different types of shareholder can tell us about 839.

See our latest analysis for China Education Group Holdings

SEHK:839 Ownership Summary, July 16th 2019
SEHK:839 Ownership Summary, July 16th 2019

What Does The Institutional Ownership Tell Us About China Education Group Holdings?

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 own 8.4% of China Education Group Holdings. 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 China Education Group Holdings’s historic earnings and revenue, below, but keep in mind there’s always more to the story.

SEHK:839 Income Statement, July 16th 2019
SEHK:839 Income Statement, July 16th 2019

Hedge funds don’t have many shares in China Education Group Holdings. 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 China Education Group 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. Company management run the business, but the CEO will answer to the board, even if he or she is a member of it.

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 own more than half of China Education Group Holdings Limited. This gives them effective control of the company. Given it has a market cap of HK$24b, that means insiders have a whopping HK$18b worth of shares in their own names. Most would argue this is a positive, showing strong alignment with shareholders. You can click here to see if they have been selling down their stake.

General Public Ownership

The general public, with a 17% stake in the company, will not easily be ignored. While this group can’t necessarily call the shots, it can certainly have a real influence on how the company is run.

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.

I always like to check for a history of revenue growth. You can too, by accessing this free chart of historic revenue and earnings in this detailed graph.

But ultimately it is the future, not the past, that will determine how well the owners of this business will do. Therefore we think it advisable to take a look at this free report showing whether analysts are predicting a brighter 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.

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.

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. Thank you for reading.