Institutional investors may adopt severe steps after Xinzhi Group Co., Ltd.'s (SZSE:002664) latest 9.7% drop adds to a year losses

Key Insights

• Significantly high institutional ownership implies Xinzhi Group's stock price is sensitive to their trading actions
• A total of 4 investors have a majority stake in the company with 51% ownership
• Insiders own 26% of Xinzhi Group

A look at the shareholders of Xinzhi Group Co., Ltd. (SZSE:002664) can tell us which group is most powerful. And the group that holds the biggest piece of the pie are institutions with 36% ownership. That is, the group stands to benefit the most if the stock rises (or lose the most if there is a downturn).

And so it follows that institutional investors was the group most impacted after the company's market cap fell to CN¥5.1b last week after a 9.7% drop in the share price. This set of investors may especially be concerned about the current loss, which adds to a one-year loss of 25% for shareholders. Often called “market movers", institutions wield significant power in influencing the price dynamics of any stock. Hence, if weakness in Xinzhi Group's share price continues, institutional investors may feel compelled to sell the stock, which might not be ideal for individual investors.

In the chart below, we zoom in on the different ownership groups of Xinzhi Group.

See our latest analysis for Xinzhi Group

What Does The Institutional Ownership Tell Us About Xinzhi 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.

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

We note that hedge funds don't have a meaningful investment in Xinzhi Group. Our data shows that CITIC Asset Management Corporation, Ltd is the largest shareholder with 26% of shares outstanding. Meanwhile, the second and third largest shareholders, hold 11% and 11%, of the shares outstanding, respectively.

To make our study more interesting, we found that the top 4 shareholders control more than half of the company which implies that this group has considerable sway over the company's decision-making.

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. There is a little analyst coverage of the stock, but not much. So there is room for it to gain more coverage.

Insider Ownership Of Xinzhi 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.

It seems insiders own a significant proportion of Xinzhi Group Co., Ltd.. It has a market capitalization of just CN¥5.1b, and insiders have CN¥1.3b worth of shares in their own names. This may suggest that the founders still own a lot of shares. You can click here to see if they have been buying or selling.

General Public Ownership

With a 35% ownership, the general public, mostly comprising of individual investors, have some degree of sway over Xinzhi Group. While this group can't necessarily call the shots, it can certainly have a real influence on how the company is run.

Next Steps:

While it is well worth considering the different groups that own a company, there are other factors that are even more important.

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.

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.

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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.