Huaming Power Equipment Co.,Ltd's (SZSE:002270) last week's 3.9% decline must have disappointed private companies who have a significant stake

Key Insights

• Significant control over Huaming Power EquipmentLtd by private companies implies that the general public has more power to influence management and governance-related decisions
• The top 5 shareholders own 51% of the company
• 18% of Huaming Power EquipmentLtd is held by Institutions

Every investor in Huaming Power Equipment Co.,Ltd (SZSE:002270) should be aware of the most powerful shareholder groups. The group holding the most number of shares in the company, around 44% to be precise, is private companies. That is, the group stands to benefit the most if the stock rises (or lose the most if there is a downturn).

And last week, private companies endured the biggest losses as the stock fell by 3.9%.

In the chart below, we zoom in on the different ownership groups of Huaming Power EquipmentLtd.

See our latest analysis for Huaming Power EquipmentLtd

What Does The Institutional Ownership Tell Us About Huaming Power EquipmentLtd?

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 Huaming Power EquipmentLtd does have institutional investors; and they hold a good portion of the company's stock. 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. 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 Huaming Power EquipmentLtd's earnings history below. Of course, the future is what really matters.

Hedge funds don't have many shares in Huaming Power EquipmentLtd. Shanghai Huaming Electric Power Equipment Group Co., Ltd. is currently the company's largest shareholder with 28% of shares outstanding. For context, the second largest shareholder holds about 15% of the shares outstanding, followed by an ownership of 2.8% 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.

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. Quite a few analysts cover the stock, so you could look into forecast growth quite easily.

Insider Ownership Of Huaming Power EquipmentLtd

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.

I generally consider insider ownership to be a good thing. However, on some occasions it makes it more difficult for other shareholders to hold the board accountable for decisions.

We can see that insiders own shares in Huaming Power Equipment Co.,Ltd. The insiders have a meaningful stake worth CN¥1.3b. Most would see this as a real positive. It is good to see this level of investment by insiders. You can check here to see if those insiders have been buying recently.

General Public Ownership

The general public-- including retail investors -- own 30% 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 Company Ownership

We can see that Private Companies own 44%, of the shares on issue. It's hard to draw any conclusions from this fact alone, so its worth looking into who owns those private companies. Sometimes insiders or other related parties have an interest in shares in a public company through a separate private company.

Next Steps:

While it is well worth considering the different groups that own a company, there are other factors that are even more important. Consider for instance, the ever-present spectre of investment risk. We've identified 1 warning sign with Huaming Power EquipmentLtd , and understanding them should be part of your investment process.

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.

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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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com