Zhejiang Rongtai Electric Material Co.,Ltd.'s (SHSE:603119) top holders are insiders and they are likely disappointed by the recent 6.4% drop

Key Insights

• Insiders appear to have a vested interest in Zhejiang Rongtai Electric MaterialLtd's growth, as seen by their sizeable ownership
• The top 5 shareholders own 51% of the company
• Ownership research, combined with past performance data can help provide a good understanding of opportunities in a stock

Every investor in Zhejiang Rongtai Electric Material Co.,Ltd. (SHSE:603119) should be aware of the most powerful shareholder groups. The group holding the most number of shares in the company, around 46% to be precise, is individual insiders. That is, the group stands to benefit the most if the stock rises (or lose the most if there is a downturn).

As a result, insiders as a group endured the highest losses after market cap fell by CN¥462m.

In the chart below, we zoom in on the different ownership groups of Zhejiang Rongtai Electric MaterialLtd.

See our latest analysis for Zhejiang Rongtai Electric MaterialLtd

What Does The Institutional Ownership Tell Us About Zhejiang Rongtai Electric MaterialLtd?

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.

As you can see, institutional investors have a fair amount of stake in Zhejiang Rongtai Electric MaterialLtd. This suggests some credibility amongst professional investors. But we can't rely on that fact alone since institutions make bad investments sometimes, just like everyone does. It is not uncommon to see a big share price drop if two large institutional investors try to sell out of a stock at the same time. So it is worth checking the past earnings trajectory of Zhejiang Rongtai Electric MaterialLtd, (below). Of course, keep in mind that there are other factors to consider, too.

We note that hedge funds don't have a meaningful investment in Zhejiang Rongtai Electric MaterialLtd. Tairong Ge is currently the company's largest shareholder with 32% of shares outstanding. For context, the second largest shareholder holds about 5.6% of the shares outstanding, followed by an ownership of 5.4% by the third-largest shareholder.

On looking further, 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.

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 Zhejiang Rongtai Electric MaterialLtd

The definition of an insider can differ slightly between different countries, but members of the board of directors always count. 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.

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 Zhejiang Rongtai Electric Material Co.,Ltd.. Insiders have a CN¥3.1b stake in this CN¥6.7b business. 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

The general public-- including retail investors -- own 40% stake in the company, and hence can't 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.

Private Equity Ownership

With an ownership of 5.4%, private equity firms are in a position to play a role in shaping corporate strategy with a focus on value creation. Sometimes we see private equity stick around for the long term, but generally speaking they have a shorter investment horizon and -- as the name suggests -- don't invest in public companies much. After some time they may look to sell and redeploy capital elsewhere.

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. For instance, we've identified 1 warning sign for Zhejiang Rongtai Electric MaterialLtd that you should be aware of.

Of course this may not be the best stock to buy. Therefore, you may wish to see our free collection of interesting prospects boasting favorable financials.

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.