Lutian Machinery Co., Ltd.'s (SHSE:605259) CEO Changguo Luo is the most upbeat insider, and their holdings increased by 11% last week

Key Insights

• Significant insider control over Lutian Machinery implies vested interests in company growth
• 75% of the company is held by a single shareholder (Changguo Luo)
• Using data from company's past performance alongside ownership research, one can better assess the future performance of a company

A look at the shareholders of Lutian Machinery Co., Ltd. (SHSE:605259) can tell us which group is most powerful. With 85% stake, individual insiders possess the maximum shares in the company. Put another way, the group faces the maximum upside potential (or downside risk).

As a result, insiders scored the highest last week as the company hit CN¥2.3b market cap following a 11% gain in the stock.

In the chart below, we zoom in on the different ownership groups of Lutian Machinery.

Check out our latest analysis for Lutian Machinery

What Does The Institutional Ownership Tell Us About Lutian Machinery?

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.

Institutions have a very small stake in Lutian Machinery. That indicates that the company is on the radar of some funds, but it isn't particularly popular with professional investors at the moment. So if the company itself can improve over time, we may well see more institutional buyers in the future. When multiple institutional investors want to buy shares, we often see a rising share price. The past revenue trajectory (shown below) can be an indication of future growth, but there are no guarantees.

Hedge funds don't have many shares in Lutian Machinery. With a 75% stake, CEO Changguo Luo is the largest shareholder. With such a huge stake, we infer that they have significant control of the future of the company. It's usually considered a good sign when insiders own a significant number of shares in the company, and in this case, we're glad to see a company insider with such skin in the game. With 7.0% and 1.6% of the shares outstanding respectively, Yutian Shao and Great Wall Fund Management Co., Ltd are the second and third largest shareholders.

While studying institutional ownership for a company can add value to your research, it is also a good practice to research analyst recommendations to get a deeper understand of a stock's expected performance. As far as we can tell there isn't analyst coverage of the company, so it is probably flying under the radar.

Insider Ownership Of Lutian Machinery

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.

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 Lutian Machinery Co., Ltd.. This gives them effective control of the company. Given it has a market cap of CN¥2.3b, that means they have CN¥2.0b worth of shares. Most would argue this is a positive, showing strong alignment with shareholders. You can click here to see if those insiders have been buying or selling.

General Public Ownership

The general public-- including retail investors -- own 10% stake in the company, and hence can't 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:

While it is well worth considering the different groups that own a company, there are other factors that are even more important. To that end, you should be aware of the 1 warning sign we've spotted with Lutian Machinery .

Of course this may not be the best stock to buy. So take a peek at this free 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.

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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.